COCOA
After a 3254, 31% decline in seven sessions, September Cocoa appears to have found at least temporary support around the 7000 level. At its low in May, the market had corrected 50% of the contract’s entire range, and that level, 6418, could be good support until more is known about the state of the crop in west Africa. The region is seeing some seasonal rainfall, which has improved the outlook for 2024/25 output after the extreme heat this spring raised concerns. Growers said this week that mid-crop supplies are tapering off and that the supply of beans from the bush will be tight in July, but they also said supplies could be significant starting in mid-August. The quality of the beans should be better then as well. Flowering for the new crop has reportedly begun in some plantations. It has been awhile since we heard talk about the potential for a fourth straight global supply deficit in 2024/25, and it is possible that traders have changed their view now that the rains have arrived. ICCO has stressed that they will need to see pod count survey results before they can make an educated guess.
COFFEE
The coffee market remains confined to a month-long range after it failed to take out the June high this week. The market has lacked the type of bullish news lately to send it to new highs. The drought in Vietnam has been described as the “worst in a decade,” but there have been reports of intermittent rains recently rather than the onslaught of “no rain, no rain” that the market heard earlier this year. Brazil’s Minas Gerais region has also been dry, but it appears that the region will not see a frost threat in the first part of July. The 15-day rainfall forecast for region shows slightly above normal chances for rain. There is a chance of frost for southern Parana over the next 10 days, which could include some coffee growing areas, but it does not extend to Minas Gerais. ICE arabica stocks fell 33,975 bags yesterday to 808,459, their lowest level since June 13 and their first daily decline since June 3. Stocks pending inspection fell 8,355 to 35,807. Recent Commitments of Traders data showed managed money traders were net long to 60,645 contracts, which is historically large and leaves the market vulnerable to long liquidation selling.
COTTON
The rally in the cotton market has stalled ahead of the USDA Acreage report tomorrow. At its high yesterday the market had rallied 5.39 off the June 17 low, for a gain of 8%. It may take some direction from the weekly export sales report today but probably defer to acreage report. Last week’s export sales report showed net sales of 189,016 bales for the 2023/24 (current) marketing year and 111,799 for 2024/25, for a total of 300,815. This was down from 354,252 the previous week but was the second highest since May 2. Sales have been above 300,000 bales in three out of the past four weeks and four times since the beginning of May. Prior to that, you have to go back to February 1 to see a number that high. For the acreage report, the trade is looking for planted area at 10.829 million acres planted (range 10.5-11.2 million). This would be up from 10.673 million in the March intentions report and 10.23 million in 2023. The five-day forecast has heavy rain in the southeast and moderate rains in the Delta and Texas Panhandle. Things turn drier in the 6-10-day and 8-14-day outlooks, which show a significant heat over the Delta and Southeast and below normal chances of rain. West Texas looks a little less hot with normal to above normal rainfall. This could support the market once the Acreage report is absorbed.
SUGAR
October sugar traded to its highest level since May 9 overnight. Hot and dry conditions in Brazil have lowered expectations for their cane crop and have helped the sugar market form a low over the past month. EU beet yield forecasts were lowered this week due to heavy rains in western Europe. Dry weather in Thailand this week has helped cane planting, and moderate to heavy rains could slow progress next week. India is expect to see moderate to heavy rains as well, which could advance their cane production. Unica is expected to release its report on Brazil sugar production for the first half of June this week. S&P Global is looking for Center-South production to come in at 2.92 million metric tons, which would be up 14% from last year. The previous report showed second-half May production at 2.7 million tons, down 7.7% from last year. Cumulative production since October 1 was 11.8% above a year ago. The “sugar mix” (percent of sugar produced) was down in May from the previous months, but industry representatives have said they expect the mix to increase as more new-crop cane is crushed. That the dry weather the region experienced earlier this year is expected to eventually pull yields down. The Philippines are looking to import 200,000 tons of sugar by September to fill a projected shortfall before the harvest season, according to that nation’s Agriculture Secretary. The July contract expires tomorrow; traders are expecting heavy deliveries from Brazil, and the July is trading at a steep discount to October.
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