Evening markets: Cotton futures jump on US sales, inventory data
Corn wasn’t the only agricultural commodity to find support in the US Department of Agriculture’s slew of data (as reported elsewhere on Agrimoney).
It wasn’t even the biggest beneficiary, with that title going to cotton, which for May ended up 2.7% at 85.12 cents a pound in New York, only just short of the nine-month closing low for a nearest-but-one contract set on Monday.
The fibre received, like corn, a double set of bullish USDA data - in terms of strong weekly export statistics, plus an unexpectedly large downgrade in the much-followed Wasde briefing to the estimate for stocks at the close of 2017-18.
However, the cotton data were particularly impressive, with actual shipments last week, for instance, pegged at the fifth largest on data going back to 1990.
As Louis Rose at Rose Commodity Group said, the weekly export report “featured very strong sales data… and a marketing-year high shipment figure”.
“The US is 100% committed and 46% shipped versus the USDA’s export target” for 2017-18, which does not end until July.
(Commitments = completed exports + unfulfilled orders, with the actual shipment figure having been a source of concern.)
“We think that sales and shipment figures within today’s report are bullish,” Mr Rose said.
Also among soft commodities, but unrelated to any US data, cocoa futures soared 2.7% to £1,773 a tonne in London for May, a 13-month closing high for a nearest-but-one lot.
New York cocoa futures for May managed a 16-month closing high on the same basis, by ending up 2.0% at $2,493 a tonne.
The gains reflected continues worries over supplies from West Africa, where Cote d’Ivoire’s cocoa board is reported to have oversold the bean, compared with production expectations facing downgrades on weather setbacks.
“Current West Africa weather is hot enough and dry enough to create production concerns,” said Jack Scoville at Price Futures, noting “ideas of increasing demand” too.
“Processing margins are said to be very strong,” although at some point, of course, this will be tested if prices continue to rally.
‘Chart signals on the front foot’
Technical factors were seen as supportive too, with Sucden Financial saying earlier that, for New York futures, “despite the recent consolidation, the indicators remain on the front foot.
“To renew bullish sentiment, futures need to gain a footing above $2,460 a tonne,” which of course the May contract ended up closing above.
“This would bring into play $2,516 a tonne and then the 176.4% Fibonacci level at $2,585 a tonne.”
Mr Scoville said: “Weekly charts suggest that futures can move much higher and to or above $3,300 a tonne in New York over time.”
Michael Seery at Seery Futures said that “I still think if weather conditions don’t improve in West Africa prices could move sharply higher from today’s price levels.
“The next major level of resistance is at $2,600-2,700 a tonne, and if that is broken I think we could test the $3,000 level rather quickly as the volatility is certainly starting to expand.”
Raw sugar futures for May bounced too, adding 0.8% to 12.89 cents a pound, on bargain hunting, as well as profit-taking by investors who had short bets in the run up to the eight-month closing low set in the last session.
On Thursday, “the buying may have come from those anticipating the drop and taking advantage as well as those who were running short yesterday”, Sucden Financial said.
“The market dropped sharply yesterday and we are seeing a reaction today.”
But coffee futures failed to follow the rising trend, with arabica beans lacking the rebound that sugar had to see off weakness in the Brazilian real, which dropped 0.5% against the dollar.
A weaker real cuts the dollar value of assets in which Brazil is a big player.
New York arabica coffee for May eased 0.4% to 120.30 cents a pound, despite a trim by Brazil’s IBGE statistics institute of 200,000 bags, to 53.0m bags, in its forecast for the domestic harvest this year.
The arabica forecast was cut by 500,000 bags to 40.9m bags, on a reduced area estimate, with the downgrade offset in part by a 300,000-bag upgrade to 12.1m tonnes in the robusta coffee harvest figure.
Indeed, that weighed on robusta futures too, which ended down 1.4% at $1,760 a tonne for May delivery, despite some wheat export data from top grower Vietnam, whose February shipments tumbled by 35% month on month to 29,893 tonnes (2.16m bags), although a drop had been expected.