Cotton Futures Rise Despite More Plantings; Cocoa Pulls Back

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Cotton futures rose Thursday despite a U.S. Department of Agriculture report that indicated a boost in cotton plantings for the upcoming season.

Cotton for May, the most actively traded contract, rose 1.3% to end at 58.44 cents a pound on the ICE Futures U.S. exchange.

Cotton has struggled with a demand problem as China, once the largest buyer, pulls back on purchases and consumers increasingly turn to synthetic fibers. U.S. overseas cotton sales for the week ended March 24 were 86,400 bales, a 48% drop from the prior four-week average.

“Last week was lousy. This week was lousy,” said John Robinson, cotton marketing economist at Texas A&M University in College Station. “We can’t get a spike in export demand at 57 cents futures?”

In other markets, cocoa prices ended near one-month lows after a trade house signaled that 2016 could be a challenging year for cocoa demand.

Cocoa for May dropped 0.8% to end at $2,950 a ton, the lowest close for the most actively traded contract since March 2.

Rotterdam-based Cocoanect said in a note that while it expects cocoa-bean processing data for the first quarter–to be released next month–to show a small increase of 1% in North America and a 2% increase in Europe, the largest cocoa- consuming regions in the world with Easter boosting sales. In Asia, the firm is predicting a 10% increase from a very low base last year.

However, the firm said it thinks processing data will be more “subdued” as the upcoming midcrop in West Africa has been selling more cheaply, indicating sluggish demand. That harvest, in the world’s largest growing region, will be fully under way in April.

“On the whole, we continue to see a challenging consumption environment for cocoa in 2016 with no real pick-up in grind margins due to a still high price level and a sluggish global economy. In the absence of strong demand from emerging markets and the lack of volume growth, chocolate companies have turned to the premium sector and to pricing in order to protect their margins and profits,” the firm said.

The Hightower Report said in a note that the leg down for cocoa could be a short-term trend and that traders should expect a reversal before $2,920 a ton.

Raw sugar futures for May slipped 3.3% to end at 15.35 cents a pound, arabica coffee for May ended up 0.4% at $1.2745 a pound and frozen concentrated orange-juice futures for May delivery surged 3.8% to end at $1.472 a pound.

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