Coffee Prices Decline
Coffee prices have declined 27 cents in the past 8 sessions and reached a 14-month low. With the market technically oversold, coffee could see a technical recovery bounce. For the week, December coffee closed with a loss of 5.80 cents which was a third negative weekly result in a row. Rainfall over Brazil’s major Arabica-growing areas increased the prospect for more flowering, and that weighed on coffee prices. While there has been good flowering in Brazil during the past few weeks, coffee still has a supportive supply outlook. A rebound in global risk sentiment helped to soothe near-term demand concerns. Concerns about consumption have been given additional weight with the surge in inflation, as that could result in consumers cutting back on restaurant and retail shop purchases. There are forecasts for Brazil’s March 31 coffee stocks to fall to a record low in 2023.
Mixed demand news was not enough for the cocoa market to regain upside momentum as it will start this week in close proximity to last Wednesday’s 3-week low. Until there are more signs that inflation levels are subsiding, cocoa could see further downside before it finds a near-term price floor. The Cocoa Association of Asia said that Asian third quarter grindings came in at 231,080 tonnes, which was 9.5% above last year’s total. This was also a 1.0% increase from the second quarter, the largest third quarter grindings total on record and the second largest grindings for any quarter since Asian grindings data began in 2009. A group of major Ivory Coast grinders said that their third quarter cocoa grindings came in 18% above last year’s comparable total, and that helped to keep further losses in check as that data reflects the growth in “origin” grindings where cocoa beans are processed in the nation they were grown.
December cotton closed higher on Friday after trading to its lowest level since May 2019 earlier in the session and it appears that at least a short-term low is in place. A possible technical reversal lower in the dollar was viewed as supportive. The stock market rallied after reports of some Fed members getting uncomfortable with pressing rates too much higher, and this was supportive to cotton as well. Traders remain focused on demand, as they fear a worldwide recession could significantly lower cotton consumption. The selling trend is bearish.
Until the market receives fresh bullish supply news, sugar prices will have a tough time finding their footing. The market closed down Friday for a fifth negative daily result in a row. A rebound in crude oil and RBOB gasoline prices provided the sugar market with early carryover support. The Brazilian currency had a second sizable daily gain in a row and reached a 2 1/2 week high, which also supported sugar prices. The Unica Center-South supply report that covers the first half of October will be released early this week, and will show if Center-South mills continued to shift their crushing away from ethanol production and towards sugar production. India’s 2022/23 sugar exports are widely expected to come in below last season’s record high of 11.2 million tonnes. Even with more of their crushing diverted to ethanol, early forecasts for India’s 2022/23 sugar exports of 8 to 9 million tonnes may have be revised higher if their sugar production comes in above 36 million tonnes.
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