COCOA
March cocoa was higher overnight, but it remained well below last week’s high. An outside reversal day last Thursday has the bulls on edge. The International Cocoa Organization (ICCO) released their annual review of global cocoa stocks last week, and they reduced their 2022/23 ending stocks forecast by 110,000 tonnes to 1.690 million. This was down from 1.796 million for 2021/22 and 1.818 million for 2020/21, but the market’s failure to follow through on this news may have the longs nervous.
Bloomberg reported that Ghana’s cocoa arrivals through January 12 were 30% below the same period last year. The net long is hovering around record highs, which leaves the market vulnerable to heavy selling if support levels are taken out. The prospect of a third global supply deficit in 2023/24 continues to provide underlying support, but there are nagging concerns that high prices will lower demand.
COTTON
March cotton edged higher overnight following Friday’s sharp reversal lower. The market has found support in recent weeks on strong US export sales reports, but last week’s report was a disappointment, and traders may be worried that exports will slow down as the Chinese New Year holiday approaches. Traders are also concerned that the rally this month has priced the US out of the world market.
Thursday’s export sales report showed 142,000 bales of cotton were exported or the week ending January 18. They had been above 200,000 for the previous five weeks, and they had reached a marketing year high of 257,695 on January 11. The consistent rally in US equity market has provided underlying support, and cotton may need to see further gains to avoid a selloff.
COFFEE
March coffee was close to unchanged this morning and in the upper end of last week’s range. Shipments from Asia to Europe continue to face bottlenecks in the Red Sea. There are also reports of a shipping container shortage at Brazilian ports, which could slow movement out of Brazil. The recent rains in Brazil have been confined mostly to the northern half of the coffee belt, but forecasts are calling for showers in central areas in early February. There have been concerns that the lack of rain would hurt the 2024/25 crop, which is the “on” year in their biennial cycle.
SUGAR
March sugar was higher overnight, as it continued to draw support from tight Asian supplies and a potential slowdown in shipping from Brazil due to a lack of containers. The attacks on ships in the Red Sea have sent shipping costs higher, as ships get diverted around Africa. The situation appears to be far from getting resolved. The Unica report last week showed Brazil’s cane crush was still running well ahead of last year, even as the season has wound down.
Center-South crush was 1.110 million tonnes in the first half of January, up from 440,000 for the same period last year. Total cane crush for 2023/24 is running 19% ahead of last year. In Australia, Cyclone Kirrily did not produce the type of widespread, damaging rains that Jasper did. It was described as a “wind event” that did cause some local damage to cane crops, but it was faster moving, which kept rainfall amounts down. However, meteorologists pointed out that the moisture is still in the atmosphere, leaving the potential for an extended rain event.
Source: Admis
