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Cocoa Traders Are Worried About the World Economy and How It Would Affect Cocoa Demand

New York and London cocoa futures closed lower last week with the biggest losses in New York due to currency considerations. Ivory Coast arrivals appear to have improved lately with the recent rally in futures prices.  Ivory coast arrivals are now 1.172 million tons, up 14% from last year. The Ivory Coast Cocoa grind is now 113,803 tons, up 6.9% from last year. 

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Wheat: Wheat markets were higher last week despite increased production estimates from Russia as ship insurers will no longer cover ships going into the Black Sea.  It does not matter how much Russia produces if there is no way to move the Wheat and the move by insurers will make any movement of Wheat very difficult if not impossible for a while. Damage from extreme cold was done two weeks ago to an already damaged HRW crop. The cold weather could have produced some Winterkill in US production areas to make a small crop even smaller. Temperatures were very cold and blizzard conditions were reported farther north due to high winds blowing the snow and probably the ground into the atmosphere.  The demand for US Wheat in international markets has been a disappointment all year and was hindered by low prices and aggressive offers from Russia. Ukraine is also looking for new business for its crops and Russia is aggressive in the world market as it looks for cash to fund the war.  The demand for US Wheat still needs to show up and there is still not enough demand news to help support futures but this could now change due to the moves by the insurers. 

Weekly Chicago Soft Red Winter Wheat Futures

Weekly Chicago Hard Red Winter Wheat Futures

Weekly Minneapolis Hard Red Spring Wheat Futures

Corn: Corn and Oats closed higher last week on a lack of offers from producers against ideas of less demand and the potential for USDA to raise ending stocks estimates in the next WASDE reports.  Producers in the US are not selling as many are waiting for the next tax year to start this week before making sales. Demand for US Corn remains muted and forecasts for only light rains or dry conditions in southern Brazil and Argentina were seen.  Brazil has been hanging on but Argentina has suffered through some extreme drought. Weak demand overall for US Corn remains a big problem for the market. There are increasing concerns about demand with the Chinese economic problems caused by the lockdowns creating the possibility of less demand as South America has much better crops this year to compete with the US for sales. China is now moving rapidly to open the economy and allow people to move around with no lockdowns so the demand could start to improve.  South American prices are currently close to or above those in the US. 

Weekly Corn Futures

 Weekly Oats Futures

Soybeans and Soybean MealSoybeans closed higher last week, with Soybean Meal also higher and Soybean Oil lower. Farmers are not selling many Soybeans in the US as many are waiting for the new tax year to start this week before making any new sales. No rain was reported in Argentina and very little if any fell in southern Brazil last week.  Drier weather is the forecast for this week for southern Brazil and Argentina which could stress crops in both areas again,  Central and northern Brazil remain in very good condition with scattered showers reported. Production potential for Brazil is called very strong even with potential problems and losses in the south. Argentine production ideas continue to drop with the drought as planting is delayed and the crops already in the ground are stressed. There was news that China has started to ease Covid restrictions after some demonstrations by the Chinese people.  Ideas that Chinese demand will improve, but this could take some time as a very large part of the population now has Covid.  This has delayed a robust economic return for the country. Export demand for the US is improved from previous weeks but the pace is still behind what is needed to meet USDA projections.  Domestic demand should be strong for Soybeans as the crush spreads are strong and provided crushers with a big profit margin for their crushing.  

Weekly Chicago Soybeans Futures:

Weekly Chicago Soybean Meal Futures

Rice: Rice was a little higher last week and trends are turning mixed on the daily and weekly charts.  There is not much going on in the domestic market right now.  Most Rice farmers were not paying much attention to the market as they are involved in other pursuits such as hunting. The weekly export sales report showed stronger sales and included sales of 60,000 tons to Iraq.  Demand in general has been slow to moderate for Rice for both exports and domestic uses. Congress included support payments of two cents per pound for Rice producers in its financing bill for the next year and the bill should be signed by President Biden.  At least some traders expect selling interest to show up this week in response to the support payments as farmers could become more willing sellers of cash Rice.   

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Weekly Chicago Rice Futures

Palm Oil and Vegetable OilsPalm Oil closed higher last week on supply concerns as Indonesia moved to limit the export availability of Palm Oil. Indonesia will now permit exporters to sell six tons for every ton sold internally instead of eight as before.  Ideas of better demand and less production are still around, with production falling due to seasonal factors.  Hopes for improved demand from China were reported.  China has tried to relax some Covid restrictions so that the economy can start to function again.  However, new outbreaks of the virus are being reported and infection rates are rapidly increasing.  Ideas are that supply and production will be strong, but demand ideas are now weakening and the market will continue to look to the private data for clues on demand and the direction of the futures market.  Demand reports for the current month were stronger yesterday.  Canola was a little lower in range trading.   Ideas that Chinese demand can remain weak due to increased outbreaks of Covid there were negative.  Demand for export has been less.  Farmers are holding tight to harvested supplies.  Reports indicate that domestic demand has been strong due to favorable crush margins.  Production was much improved this year on better weather during the Summer. 

Weekly Malaysian Palm Oil Futures

Weekly Chicago Soybean Oil Futures

Weekly Canola Futures:

Cotton: Cotton was higher on Friday but still lower for the week in range trading.  Futures have been stuck in the same trading range since the beginning of November. The weekly export sales report showed improved sales but overall the demand for US Cotton has not been strong. Some ideas that demand could soon increase as China could start to open its economy in the next couple of months were hurt by news of Covid outbreaks in China.  Covid is now widespread in China so the beneficial economic effects of the opening are being delayed. The people there do not trust the government vaccines. Demand has not improved with the reduction in prices and a lower US Dollar to date.  Production in the US is very short. 

Weekly US Cotton Futures

Frozen Concentrated Orange Juice and Citrus: FCOJ was slightly lower last week, with worries still around about freeze damage to crops this weekend from freezing temperatures. Weakening demand ideas as domestic demand could be less with the holidays still around, but demand should start to improve now with the holidays almost over. Futures look weak on the daily charts. The supply situation in the US and in the world market looks very tight. Historically low estimates of production due in part to the hurricanes and in part to the greening disease has hurt production remain in place but are apparently part of the price structure now. The weather remains generally good for production around the world for the next crop but not for production areas in Florida that have been impacted in a big way by the two storms.  Brazil has some rain and the conditions are rated good. Mostly dry conditions are in the forecast for the coming days. 

Weekly FCOJ Futures

CoffeeNew York and London closed lower last week, with London lower on some speculative selling before First Notice Day today and Tet. Producers remain quiet in Vietnam and most of Latin America but should be more active this week. Vietnamese sellers should become more active in the next couple of weeks as they try to get sales on the books before the Tet holiday.  Buying interest is also reduced, but the lack of offers has motivated the market to move sideways to higher.  Buyers are expected to look for Coffee at the origin starting this week. Ideas of reduced Brazilian production and reports of reduced offers into the cash market from Brazil and Vietnam continue, but the weather is good in Brazil and improving in Vietnam.  There are ideas that the production potential for Brazil had been overrated and reports of too much rain in Vietnam affected the harvest progress.  The weather in Brazil is currently very good for production potential but worse conditions seen earlier in the growing cycle hurt the overall production prospects as did bad weather last year.  Ideas are that the market will have more than enough Coffee when the next harvest comes in a few months.  

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Weekly New York Arabica Coffee Futures

Weekly London Robusta Coffee Futures

Sugar: New York and London closed lower last week despite ideas of tight supplies available to the market. The biggest moves have been made in the top step March contract for both markets in part on what seems to be strong demand against tight nearby supplies. Supplies are expected to increase shortly but not just yet. The harvest has been delayed in Thailand. Australian and Central American harvests are also delayed.  India is producing White Sugar mostly from Raws imported from Brazil, so the market is thought to be short on Raw Sugar. There is talk that production in India will be reduced this year after some bad weather and reduced yields reported in Maharashtra.  The weather in Brazil remains good for the next crop but bad for harvest and loading at ports as it is still raining in production areas.  World Sugar is expected to be in a big surplus production next year. Conab in Brazil now estimates Sugar production at 36.4 million tons Ethanol production is now estimated at 26.6 billion liters.  Sugarcane production is estimated at 598.3 million tons, from 572.5 million in August and 578.8 million last year.  Unica estimated the crush at 5.6 million tons, up 630% from last year, for the first half of December. Sugar production was estimated at 298,000 tons and Ethanol production was estimated at 482.6 million liters

Weekly New York World Raw Sugar Futures

Weekly London White Sugar Futures

CocoaNew York and London closed lower last week with the biggest losses in New York due to currency considerations. Ivory Coast arrivals appear to have improved lately with the recent rally in futures prices.  Ivory coast arrivals are now 1.172 million tons, up 14% from last year. The Ivory Coast Cocoa grind is now 113,803 tons, up 6.9% from last year.  Good production is reported and traders are worried about the world economy moving forward and how that could affect demand. Supplies of Cocoa are as large as they will be now for the rest of the marketing year. Reports of scattered showers along with very good soil moisture from showers keep big production ideas alive in Ivory Coast. Nigeria is reporting that Harmattan winds have arrived, but no significant effects are reported for now. The weather is good in Southeast Asia. 

Weekly New York Cocoa Futures

Weekly London Cocoa Futures

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Jack Scoville is a futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. In addition to writing daily market commentaries in both English and Spanish, he offers brokerage services to an international clientele of agricultural producers, processors, exporters, and other professional traders. He is regularly quoted by major wire services including Dow Jones, AP, and Reuters. His comments are sourced by newspapers around the world and on various radio and television programs.