• Home
• Blog
• Bulletin

Commodities Markets Report. Week 10 2023

Global weather review

• La Niña continues in the tropical Pacific Ocean. However, there are early signs that La Nina may transit to El Nino by summer 2023. This transition should occur in spring.
• It is highly important to monitor transition from La Nina to El Nino this spring as it has direct implications for certain commodities markets.
• El Niño creates severe water shortages in West Africa, India and China.
• La Niña creates water abundance in Brazil, including flooding and dry spring/summer for Argentina and USA.
• El Nino will create bullish markets for sugar, rice and cocoa due to precipitation shortage
• India remained very dry across peninsula.
• Brazil is wet however this is favorable for good sugarcane production.
• China is too dry ahead of spring growing season, more rain is needed to promote good rice crop development.

Dollar Index

Commodities Index

Cocoa: Buy

• Cocoa prices on Thursday posted a little losses on stronger DXY that caused liquidation of the futures.
• On Wednesday NY cocoa reached 2-year high and London cocoa reached a 2-3/4 month high after ICCO predicted global 2023 cocoa inventories to fall -3.5% y/y to 1.653 MMT on the back of the expectation of a supply deficit due to weather risks, especially in West Africa.
• Ivory Coast farmers sent 1.70 MMT MT of cocoa from October 1 through February 26, -2.9% y/y.
• Ivory Coast cocoa exporters are to default on their contracts due to a lack of cocoa beans, with shortage estimates of 150,000 tons.
• Nigeria's Jan cocoa exports fell -5.9% y/y to 43,405 MT.
• Ghana expects 76% rise in cocoa beans for current crop season in spite of bad weather conditions.
• West Africa cocoa farmers continue to struggle with the deficit of fertilizer and pesticides due to war in Ukraine as it limited exports of Russian fertilizers worldwide.
• El Nino weather event is about to come in spring/summer which creates drought in West African region.
• Cocoa prices find bullish support on the back of tight global suppy due to lack of ferlizers, weather problems. There is mid-term risk of drought in spring and summer in West African region.
• Amid bearish factors is larger production from Ghana.

Cocoa: Weather outlook

Weather remains very dry for this time of the year ahead of small harvest season that begins in April. The crop is in bad condition in Ivory Coast. There is mid-term risk of drought in spring and summer in West African region due to transition period from La Nina to El Nino.

Cocoa: Price chart

Sugar: Buy

• Thursday sugar futures closed a little down on Stronger DXY.
• This week Sugar rallied on Tuesday after International Sugar Organization raised 22 global sugar deficit estimate to -2.25 MMT from a prior of -1.67 MMT and cut its 23 global sugar surplus estimate to 4.15 MMT from a November estimate of 6.19 MMT.
• Largest producer of sugar India said to ban additional sugar exports beyond the 6.1 MMT on production concerns from India.
• 2023 India sugar production expected to reach 34 MMT smaller that Oct estimate of 36.5 MMT, cut in sugar export is expected at 6.1 MMT lower that Oct forecast of 9 MMT.
• European Association of Sugar Manufacturers on Dec 2022 reported that EU 2022/23 sugar output would fall -7% y/y to 15.5 MMT due to weather issues.
• Expecting El Nino to arrive in spring/summer that will bring drought to India a key producing region of sugarcane globally.
• S&P Global Commodity Insights estimated that Braizl sugarcane crushing will increase for the second consecutive season to total 586 million tons in the 2023-24 crop, up 35.84 million tons from 2022-23 but still under the latest high of 605 million tons recorded with the 2020-21 crop.
• Assuming favorable weather until March in Brazil, which is the most important cane growing period, cane agricultural yield is expected to increase to 78 tons/hectare in 2023-24, up 6.5% on the year," said Luciana Torrezan, global manager of sugar analytics from S&P Global Commodity Insights. "Cane availability is expected to grow to 586 million mt, up 36 million mt on the year.“
• Sugar prices are bullish of back of sugar deficit due to lower Indian exports and ongoing weather issues.
• Amid bearish factors larger Brazil production.

Sugar: Weather outlook

India remains really dry across whole peninsula, it is a bit too dry as spring planting season had begun in February and goes on to March. There is risk of drought in the region.

Brazil remains exessively wet, however this is benefecial for sugar production as new spring planting season had begin in February and goes on to March.

Sugar: Price chart

Rice: Buy

• Rice futures closed little lower on Thursday.
• The 2022/23 global outlook this month is for slightly larger supplies, modestly lower trade, increased consumption, and lower ending stocks.
• Largest producer of sugar India said to ban additional sugar exports beyond the 6.1 MMT on production concerns from India.
• Global consumption is raised 1.1 million tons to 517.2 million as increases in China and Bangladesh more than offset a decrease for Indonesia.
• World ending stocks are lowered 0.9 million tons to 169.1 million, 8 percent lower than global ending stocks in 2021/22.
• Expecting El Nino to arrive in spring/summer that will bring drought to India a key producing region of sugarcane globally.
• Weather in key rice producing regions India and China remains really dry soil moisture is insufficient to promote good rice crop development. This is due to transition period from La Nina to El Nino had begun and it brings drought to India and China during key rice planting season.

Rice: Weather outlook

India remains really dry across whole peninsula, however there is no weather associated risk right now as growing season will start in June-August to October – December. There is risk of drought in the region due to transition from La Nina to El Nino.

China saw moderate showers however soil moisture is insufficient as new planting season to start in March and goes on to June, more rain is needed to promote good crop development. There is risk of drought in the region due to transition from La Nina to El Nino.

Rice: Price chart

Special Market Situation

SMS - refers to a set of market indicators (COT data) that indicates major market turnarounds. For example, if market is oversold it is likely moving average will go up, if market is overbought downward movement is expected.

Special situation trade setups are selected based on 10+ years of trading experience, but there are no guarantees that any trade will prove profitable or will not produce a loss. A trade may require more than one entry attempt. You alone are responsible for your trading decisions. It is up to you to control the risk by using stop losses.

This special situation does not claim immediate practical application. Actionable buy and sell signals are published on our website charts every week.

You can get more information here.

Wheat

Commercial insiders hold their largest net long position in 2.5 years. Funds are holding their largest net short total in 3.6 years, tagging wheat as speculatively oversold.

Natural Gas

Commercial insiders hold their largest net long position in 2.8 years and funds hold their largest net short total in the same period, categorizing natural gas as speculatively oversold.

Euro FX

Commercial insiders hold their largest net short (most bearish) position in 2.0 years.

RBOB Gasoline

Commercial insiders held their largest net short (most bearish) position in 1.9 years. Funds held their largest net long position in 2.0 years

Lean Hogs

Funds were holding their largest net short total in 4.6 years, labeling hogs as speculatively oversold.

Orange Juice

Funds held their largest net long position in 6.1 years, noting OJ as speculatively overbought.

Our Telegram channel

Subscribe to our Telegram channel, if you want to read our market reports and get other relevant information about trading!

Go to our Telegram