ADMIS News
The Ghost in the Machine Q3 2024
October 8, 2024
COCOA
September Cocoa failed to follow through on Thursday’s rally off surprisingly strong European grind data, and this is a disappointment for the bulls. The grind came 4.1% higher than a year ago versus expectations for a decline. One reason for the high grind number may be that chocolate manufacturers still had previously-purchased stocks to work down, but it also raises the question of whether supplies are better than estimated. Second quarter grind data for North America and Asia are due to be released Thursday. Ivory Coast port arrivals totaled 18,000 tons for the week ending July 14, down from 21,000 for the same week last year. Cumulative arrivals since the marketing year began on October 1 have reached 1.630 million tons, down 27.8% from last year. Rain was common in some cocoa regions of Ivory Coast last week, and the weather for west-central Africa is expected to continue to be favorable. Friday’s Commitments of Traders report showed managed money traders were net buyers of 1,273 contracts of cocoa for the week ending July 9, increasing their net long to 22,407. This compares to a net long of 71,000 in January, which indicates how the funds’ participation in this market has declined.
COFFEE
The drier than normal weather in Brazil has allowed their coffee harvest to advance at a faster than normal pace, but it has also raised questions about the size of crop. Last week, the Brazilian trade group Cecafe said the market consensus is for the robusta crop to be 10% smaller than initially thought, with arabica production expected to be 5% smaller. Safras and Mercado said they may cut its robusta forecast by 8-14%. They had no update on arabica production, but there have been concerns about smaller bean sizes. Several locations in the Central Highlands and northern Vietnam received light to locally moderate rainfall on Thursday, and a tropical cyclone could develop early this week off the coast that could produce heavy rain for the central part of the nation, It is not expected to damage crops or property. ICE arabica stocks declined by 3,535 bags on Friday to 805,366. Stocks fell by 5,993 last week. Friday’s Commitments of Traders report showed managed money traders were net buyers of 5,870 contracts of coffee for the week ending July 9, increasing their net long to 66,825.
COTTON
December Cotton is higher this morning following Friday’s strong close in the wake of a bearish-looking USDA report. Friday’s Commitments of Traders report showed managed money traders were net sellers of 9,577 contracts of cotton for the week ending July 9, increasing their net short to 40,449.
The USDA report showed US production and ending stocks increasing as expected, but world ending stocks fell, which was a surprise. US 2024/25 cotton production came in at 17.00 million bales, up from 16.00 million last month and slightly below the average expectation of 17.16 million. Ending stocks came in at 5.30 million bales, up from 4.10 million last month and above the average expectation of 5.05 million. Beginning stocks were increased to 3.05 million bales from 2.85 million last month, and yield was increased slightly to 844 pounds per acre from 842 in last month’s report. World 2024/25 production was estimated at 120.19 million bales, up from 119.14 million last month and right on the average expectation of 120.21 million. Beginning stocks were lowered to 79.31 million from 80.97 million last month. This put ending stocks at 82.63 million, down from 83.49 million last month and below 84.28 million expected.
The forecast has turned cooler with the 6-10 and 8-14-day forecast both calling for below normal temperatures for Texas and the Delta and normal to below normal temps in the southeast. Above normal precipitation is expected across the cotton growing regions, which will be appreciated in the Carolinas, Georgia, parts of the Delta and west Texas. West Texas could even see much above normal rainfall. Beneficial rains fell in central and eastern North Carolina last week, as well as south-central Georgia. The southeast and Delta are expected to see heavy rainfall this week. The drought monitor this week showed approximately 18% of the US cotton crop was in an area experiencing drought as of last Tuesday, up from 16% two weeks ago and 15% a year ago. Moderate to severe drought was prevalent in the Carolinas, with abnormally dry to moderate drought in the Georgia and the northern Delta, and abnormally dry to severe drought in west Texas. As of last week, US crop conditions had fallen below year ago and 10-year average levels. Last year, conditions continued to decline through the summer, especially in Texas, but given the current forecast, the trajectory looks different this year.
SUGAR
October sugar extended Friday’s losses overnight and fell to its lowest level since June 24. Parts of the Center South region of Brazil saw decent rainfall over the last week, which is an improvement over recent trends. Last week’s UNICA report showed Brazilian Center-South sugar production at 3.25 million metric tons in the second half of June, up 20% from a 2.70 million a year ago and up from 3.12 million during the first half of the month. This was the strongest period so far this season, and it brought total production since the marketing year began on April 1 to 14.2 million tons, up 15.7% from last year. UNICA’s director maintained that the dry weather that has allow the fast harvest pace also raises the risk of lower yields.
The USDA supply/demand report on Friday put US 2024/25 sugar production at 9.325 million short tons raw value, up from 9.200 million in the June report. The Beet sugar production was increased to 5.236 million STRV from 5.111 million previously. Ending stocks were forecast at 1.695 million STRV, up from 1.445 million in June but down from 1.986 million last year. The stocks/use ratio was 13.5% versus 11.5% in June and 15.6% a year ago.
Friday’s Commitments of Traders report showed managed money traders were net buyers of 3,424 contracts of sugar for the week ending July 9, increasing their net long to 39,803.
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