ADMIS News
COFFEE
Even if global risk sentiment remains volatile, coffee prices should be able to maintain upside momentum over the rest of this week. March coffee fell to a 4-week low yesterday, but it rallied back to unchanged levels before finishing Monday with a moderate loss and has followed through with sizable early gains this morning. Brazil, Colombia and Honduras are all expecting to have an increase in their Arabica production this season, and that continues to be a source of pressure on prices. There was below normal rainfall over Brazil’s major Arabica growing region last week which is likely to negatively impact their upcoming 2024/25 crop, however, and that provided support to the market this week. In addition, Robusta growing areas in Vietnam, Brazil and Indonesia are having supply issues that have provided support.
COCOA
After threatening for several weeks, cocoa prices broke out of their December/January consolidation zone to the downside on Monday. With global risk sentiment taking a negative shift early in today’s trading, cocoa may be vulnerable to further downside action. While West Africa is well into its “dry” season, there was significant rainfall across many of the region’s cocoa-growing areas last week. This was the catalyst for a wave of profit-taking and additional long liquidation putting pressure on the cocoa market. Outside markets have been under pressure early in today’s action, however, and their continued weakness could erode cocoa’s near-term demand outlook fairly quickly.
COTTON
Although global risk sentiment has taken a negative shift early today, cotton prices should be able to maintain upside momentum. March cotton rallied late to finish Monday with a mild gain, and it has shaken off choppy overnight action to have moderate gains coming into this morning’s action. The Shanghai Composite broke a 3-session losing streak with a modest gain today, and that may help to offset early weakness in European and US equities as stronger Chinese stocks markets can help to soothe Chinese near-term demand concerns. A rebound in the Dollar early today may pressure the cotton market as that can make US cotton less competitive with Brazilian and Australian cotton, but the Dollar continues to hold well below last Friday’s 4-week high.
SUGAR
The sugar market appears to have regained upside momentum and is closing in on a 3-week high despite critical Brazilian supply data coming out at midweek. There are reports of severe flooding in Australia’s key cane-growing area in northern Queensland following Tropical Cyclone Jasper, with some farmers reporting a loss of 60% of the cane crop. This will reduce Australia’s upcoming sugar production and should underpin prices. Production issues in Thailand and India continue to underpin sugar prices as they will offset a large portion of Brazil’s production increase this season. The latest Unica bimonthly supply report will come out later this week which will cover Center-South activity during the second half of December. It is very likely the high first-half crush and sugar production pace will have carried through to the second half of December. Second-half December 2022 crush was 2.631 million tonnes and sugar production 165,000 tonnes. Early forecasts for Brazil’s upcoming 2024/25 Center-South cane crush call for a mild reduction from this season’s total.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
