Commodities Markets Report. Week 4 2023

Global weather review

  • La Niña continues in the tropical Pacific, but has weakened from its peak in spring 2022. Though ocean temperatures have warmed in recent weeks, atmospheric indicators are largely unchanged and remain at La Niña levels. La Niña typically increases the chance of above average rainfall for northern and eastern Australia during summer.
  • Long-range forecasts suggest that tropical Pacific Ocean temperatures will continue to warm and be at ENSO-neutral levels (neither La Niña nor El Niño) during February, with a change in atmospheric patterns towards neutral levels likely to follow. As accuracy is generally lower for long-range forecasts made at this time of year, ENSO outlooks that extend past autumn should be viewed with caution.
  • A transition from La Niña to ENSO-neutral is anticipated during the February-April 2023 season. By Northern Hemisphere spring (March-May 2023), the chance for ENSO-neutral is 82%.
  • The Indian Ocean Dipole (IOD) is neutral and has little influence on Australian climate while the monsoon trough is in the southern hemisphere (typically December to April).
  • Globally there were no weather extremes.
  • Brazil remains wet, Argentina and West Africa dry, EU was warm and China rainy, India continues to be dry and Australia was sunny.

Dollar Index

Commodities Index

Cocoa: Sell

Cocoa prices find bearish support on the back of larger global supply, good weather prospects and low demand.

  • Cocoa futures closed lower on Thursday.
  • Market operates under low demand conditions.
  • European Cocoa Association reported that EU Q4 cocoa grindings decreased -1.7% y/y to 359,577 MT.
  • Ivory Coast is dumping market with cheap cocoa supplies. Farmers sent a cumulative 1.45 MMT MT of cocoa from October 1 to January 15, increase of +11.5% y/y.
  • Harmartan Passat winds are not strong enough to damage cocoa corps and wet weather is expected next week during key cocoa development period.
  • Nigeria's Nov cocoa 5th Top exporter sold +130% m/m and +17% y/y to 36,819 MT in December 2022.

Cocoa: Weather review

West African region remains dry however next week more rains are expected therefore level of threat is moderate. More consistents rains are needed during key cocoa development period.

Cocoa: Price Chart

Wheat: Sell

Wheat prices are bearish on the back of larger global supply, exports and ending stocks.

  • Wheat futures closed few cents lower on Thursday.
  • The 2022/23 global outlook is for increased supplies, exports, consumption, and stocks.
  • World supplies are raised 1.3 million tons to 1,058.1 million on production increases in Ukraine and the EU.
  • World consumption for 2022/23 is raised by 0.2 million tons to 789.7 million as higher feed and residual use for the United States more than offsets a decline for Ukraine.
  • Projected 2022/23 global trade is increased 0.8 million tons to 211.6 million as increases for the EU and Ukraine more than offset a decline for India. EU and Ukraine exports are raised 0.5 million tons each to 36.5 and 13.0 million respectively on higher exportable supplies.
  • Projected 2022/23 global ending stocks are raised 1.1 million tons to 268.4 million, with increases for the EU, Ukraine, Kazakhstan, and India more than offsetting declines in Saudi Arabia and Iran.
  • Geopolitics right now is not a factor, as well as weather.

Wheat: Weather review

In Europe very warm weather prevailed while rain expanded across much of the continent. Rain in northern Italy (50-140 mm) also eased long-term drought and improved moisture reserves for wheat.

In Australia sunny skies favored final winter crop harvests. In the wake of a very wet winter crop growing season, drier-than-normal weather overspread much of the wheat belt during December. The relative dryness was very timely and welcome, aiding the drydown and harvesting of wheat.

In Canada generally mild December favored overwintering wheat and pastures. Monthly average temperatures ranged from 1 to 2°C above normal in Ontario’s southwestern farming areas to 3°C or more above normal in southern Quebec.

Drought persisted in high-yielding farmlands of central Argentina.

Widespread, locally heavy rainfall in grains areas of central and northeastern Brazil contrasted with patchy dryness farther south.

December showers were generally confined to the seasonably wetter southern sections of China. Rainfall was all but nonexistent on the North China Plain, with amounts below 25 mm south of the Yangtze River and up to 100 mm in parts of the southeast. While rainfall was well below normal (less than 50 percent of normal) in all but some southeastern locales, colder than-normal weather (1-3°C below average) had eased wheat into dormancy, lowering moisture needs. .

Wheat: Price Chart

Sugar: Sell

Sugar is bearish on the back of larger India and Brazil production, global sugar surplus.

  • Sugar futures closed lower on Wednesday.
  • Sugar prices follow crude prices WTI fell from 6-weeks high.
  • Lower crude prices encourage sugar producers to produce more sugar rather than ethanol and thus bearish for sugar prices.
  • Two global largest suppliers Brazil and India boosted their sugar production creating surplus of sugar.
  • Brazil remains in overproduction zone, production through December rose +4.4% y/y to 33.462 MMT.
  • India is for higher production, production from Oct-Jan 15 increased +4% y/y to 15.7 MMT.
  • ISMA forecasted that India's sugar production to climb +2% y/y to 36.5 MMT as Indian farmers increased planted acreage by +5.4% y/y to 5.6 mln hectares.
  • World remains in surplus of sugar, global sugar production increased +5.5% y/y to a record high of 182.1 MMT and global sugar surplus is at +6.2 MMT.

Sugar: Weather review

India has good sugar harvest weather mostly dry across most of the peninsula. Some pockets or rain did not interrupt harvest season that goes on from December to March.

Brazil was mostly wet which is beneficial for maturing sugarcane, there is no weather associated risk. By the time of harvest season in April sugarcane will receive good amount of moisture.

Sugar: Price Chart

Coffee: Sell

Coffee is bearish on the back of larger Brazil crop and improving Brazil coffee weather, higher inventory levels both in US and Europe.

  • Coffee futures closed higher on Wednesday following strength in USD.
  • Global inventory level remains very high as well as the weather is very favorable for future coffee crops.
  • Coffee production is supported by better supply prospects from top producer Brazil. The positive outlook for Brazil's arabica crop after recent rains continues to weigh on prices.
  • ICE arabica coffee inventories posted a 6 month high of 858,661 bags this Wednesday.
  • U.S. Dec green coffee inventories increased +9.3% y/y to 6.38 mln bags.
  • Brazil coffee production increased +6.7% y/y to 50.9 mln bags in 2022.
  • Coffee importer Wolthers Douque projected that Brazil's 2023 coffee crop to increase by +16% y/y to 65 mln bags due to improved weather conditions.

Coffee: Weather review

Somar Meteorologia reported on Monday that Brazil's Minas Gerais region received 115.4 mm of rain last week, or 193% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop.

Colombia saw more than average amount of rain beneficial for maturing coffee crops.

Coffee: Price Chart

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

About the author

Max Schulz is a professional futures and commodities trader. He is the founder and head of InsiderWeek. For many years he has been helping people achieve their financial goals by training them in futures trading.

These articles might be interesting for you

Currencies
COT Data for your FOREX Trading - How does it work?

Are you an experienced FOREX trader looking for additional information...

Read more >>
Success stories
Who is Larry
Williams?

Larry Richard Williams was born on October 6, 1942, in the 8,000-person small town of Miles City, Montana, USA...

Read more >>
Success stories
Living and trading in Thailand - how good is it?

Experience the ultimate tropical paradise in Thailand with sun, beach...

Read more >>
Trading strategy
Crisis-proof ETF strategy - Surviving a Crash

This strategy is easy to implement and has achieved a double-digit return...

Read more >>
Trading psychology
3 Factors that determine your Professional Trading Mindset

Many traders who are new to the subject experience...

Read more >>
Trading Strategy
What are trading strategies? An overview of the 4 most common trading styles

Have you ever questioned what lies behind...

Read more >>
COMMODITIES
How the Indian monsoon can affect resources

With commodities such as sugarcane and cotton, there are often...

Read more >>
Trading Strategy
Gold Rush Friday – A simple yet effective strategy

One of the relatively stable patterns in the gold market is the so-called...

Read more >>
Trading Basics
US stock market trading hours: the 4 most important US futures exchanges

At InsiderWeek, we only trade US futures. You can find...

Read more >>
Trading Basics
Sentiment analysis — the 4th dimension of trading

Many traders only focus on the price when looking at the market...

Read more >>
Trading Strategy
What is Open Interest? With examples from futures trading

Are you wondering what open interest is and whether...

Read more >>
Bulletin
Commodities Markets Report. Week 3 2023

Models suggest La Nina will not weaken in Q1 and probably will fall into La Nada in summer...

Read more >>
Trading results
Our Futures Trading Results. Week 50 2022

Thursday, 12th of January, we will hold the webinar on the current trading opportunities and our 2023 plans...

Read more >>
COT Report Trading Strategy

This is one of our major strategies that allowed us to increase our trading capital from $ 14.000 to over $ 550.000 within just 6 years...

Learn more >>

Sign up for our newsletter

We will notify you of upcoming webinars. We promise to only send the most useful information and not to spam.