This was the first decline in inventory levels in several weeks, analysts said. Brent crude for June was lower by May 7, settling at $107.06 a barrel on London-based ICE Futures Europe.
Cotton eases after five-week high
Among soft commodities, cotton futures eased back this week after hitting a five-week high on May 2 amid worries about potential crop damage in Texas, the U.S.’ top cotton-growing state. Dry weather through April contributed to worsening drought in key growing areas in the state.
Cotton futures for July delivery on New York’s ICE Futures U.S. exchange climbed to 95.10 cents a pound on May 2, the highest for the second-month contract since March 26, before settling at 94.32 cents. By May 7, July cotton was down 0.34 cents to close at 93.98 cents a pound.
Some 37 percent of Texas is now in extreme or exceptional drought, according to the latest report from U.S. drought monitor released April 29, up 5 percent on the previous week. Over 74 percent of Texas is suffering moderate drought or worse.
Worries over U.S. supplies of the fiber have helped support prices in recent months despite burgeoning global stocks and an expected coming steep reduction in top consumer China’s import demand as the country prepares an overhaul of its cotton stockpiling program. The U.S. is the world’s biggest cotton exporter, accounting for around 20 percent of world exports of the fiber in 2012-2014.
Meanwhile, the IntercontinentalExchange plans to launch its new world cotton futures contract in the fourth quarter this year, subject to regulatory approvals. The contract will price cotton delivered from multiple origins: the U.S., Australia, Brazil, India, Benin, Burkina Faso, Cameroon, Cote d’Ivoire and Mali. It also will provide delivery in multiple locations in the U.S., Australia and Malaysia.
The new contract provides the first alternative to pricing to ICE’s No. 2 cotton futures contract which prices only cotton grown and delivered in the U.S. According to a spokesperson for Atlanta-based ICE, the new contract will complement and trade alongside the existing benchmark Cotton No. 2 contract.
She said the new world cotton contract was developed based on extensive consultation with the cotton trade to meet evolving risk management needs.
The exchange previously had planned to list the world contract early this year.
Cocoa futures were pressured by expectations of better-than-expected mid-crops in West Africa, where harvesting is gathering pace. Plentiful rain has led analysts to raise forecasts for top-producer and exporter Cộte d’Ivoire in particular and for the time being play down the increasing risk of El Niño which often leads to disproportionate dryness in West Africa.
July cocoa futures on ICE Futures U.S. at midweek settled at $2,907 a tonne a whisker off the two-month session low of $2,910 a tonne recorded on May 1 on the back of heavy selling volume. It was a similar picture on London-based NYSE Liffe where cocoa for delivery in the same month settled at £ 1,802 a tonne.
Under the latest retreat, cocoa prices have rallied this year on expectations of a supply deficit, with the second-position contracts recording two-and-a-half year highs of $3,027 a tonne in New York and £1,888 a tonne in London markets in March.
Raw sugar futures slipped to their weakest in more than two weeks as weak demand and dry weather prospects in Brazil’s main cane-growing South-Center region weighed on the market. July futures on ICE touched 17.08 cents a pound in early trade on May 8 after settling at 17.29 cents a pound on the previous day and down 0.47 cents on April 30’s close.
The most-active contract on ICE hit a four-month high of 18.47 cents a pound in early March at the peak of the worries about Brazil’s drought-related crop damage; the country is the world’s biggest sugar producer and exporter. In January, the sweetener was trading at a three-year low of 15.86 cents burdened by large exportable global surpluses.
As noted in last week’s AFKInsider Commodities Report, Rabobank is among those market watchers that expect weather-related risk, particularly from El Nino, to continue to support raw sugar futures but anticipate supply side pressures to cap upside potential.
August refined, or white, sugar on NYSE Liffe settled at $468.65 a tonne at midweek, a $2 gain on the day but down $8.35 on the week.
Meanwhile, arabica coffee futures continue to ease back from the 26-month high of $2.1892 a pound reached on Apr. 23 as the market awaits further indications of the extent of the 2014-2015 crop losses due to the drought conditions in southern areas of Brazil earlier this year. Brazil is the world’s largest producer and exporter of Arabica coffee.
July arabica on ICE Futures U.S. settled at $2.0095 a pound on May 7, down 1.58 cents on the day. A week earlier, July arabica had finished at $2.0513 a pound.
Robusta coffee futures were also lower by midweek, with the July Liffe contract $4 down at $2,143 a tonne at midweek.
While care has been taken to ensure that the information contained in this report is accurate, it is supplied without guarantee. The author can accept no responsibility for any errors or any consequence arising from the information provided.
