Pressure On the Sugar Market

SUGAR

Strong production out of Brazil so far this season and improving outlooks for cane crops in Thailand and India have put pressure on the sugar market. Prices were slightly lower overnight. Russia conducted its second test of the sugar beet crop this week, and it showed an average root weight of 190 grams, up from 173 grams for the same time a year ago. Center-South Brazil is expected to see dry conditions return through the end of the month, which could keep harvest going at strong pace. Dry conditions this past winter and spring have raised concerns that the crop will come up short of last year, but as of June 30, production was running well ahead of a year ago. The region received some rain last week, which could eventually boost yields. Malaysia has asked India to ease export curbs on some farm goods, including sugar. The strong monsoon this year is boosting expectations for India’s cane crop, but the government may be reluctant to lift its export curbs as it wants to support the domestic ethanol industry. The Indian government also wanted to keep domestic sugar prices down ahead of their elections, which were completed on June 1, and they may be more open to allowing exports now.

COCOA

The Asia second quarter grind overnight came in at 210,968 metric tons, down 1.45% from the same period a year ago. This followed a pattern similar to the first quarter, which was down 1.41% from last year. The North American grind will be released later today. Their first quarter grind was up 3.66% from year-ago. Last week, Europe’s second quarter grind figure surprised the market with a 4.1% gain from last year. Their first quarter grind was down 2.9%. Ivory Coast’s June grind released earlier this week was down 25.9% year on year. The question is, does the higher than expected grind mean that demand is resilient or that supply is less tight that feared? It does appear that Europe had cocoa to grind and Ivory Coast processors did not. Growers in Ivory Coast have recently expressed optimism about the 2024/25 crop, with the mix of rain and sunshine being good for pod development.

COFFEE

September Coffee was near unchanged overnight, and it has been in a mostly sideways pattern for the past week after a breakout rally on concerns over Vietnamese supply. Vietnam’s crop outlook is improving with recent rainfall, but harvest is not expected to start until October or November. Old crop supplies are said to be extremely tight. Indonesia’s harvest is picking up and is expected to be completed this month or next, which limits upside potential for the robusta market. Brazil’s harvest is running ahead of the average pace, but there are concerns that dry conditions there will lead to a smaller crop. There is still no rain on the horizon for Minas Gerais but no threat of a frost either. There were comments yesterday that logistics problems at Brazil’s Port of Santos were supporting prices. ICE arabica stocks increased by 7,662 bags yesterday to 809,209, but the amount pending grading fell by 10,040 bags to 13,224.

COTTON

December Cotton is holding a minor uptrend off the post-USDA low, as traders have been reluctant to push the market too far down this early in the season, especially with the fund net short recently approaching record levels. Last week’s US drought monitor showed some expansion of dry/drought conditions in major cotton growing areas, but active rainfall over the past week, especially in the southeastern US, could reverse that in today’s update. Crop conditions stabilized last week after declining for several weeks, and the recent rains suggest they could improve in Monday’s report. Last week’s export sales report had some pretty dismal numbers for cotton, with net sales for the week ending July 4 at 56,741 bales for the 2023/24 (current) marketing year and 69,481 for 2024/25 for a total of 123,619. This was down from 172,249 the previous week and the lowest since April 4. Cumulative sales for the 2024/25 are the lowest for this point in the season since 2015/16. The dollar fell to its lowest level since June 7 yesterday and has been on a steady decline this month, as anticipation has built for a Fed rate cut in September. This helps US export prospects. More rain is expected over the next five days cross the cotton belt, with heavy amounts in some areas. The forecasts call for above normal chances of rainfall through July 31. The 6-10-day forecast has cooler than normal temperatures in Texas and the Delta. Disappointing economic data out of China this week adds to concerns about demand.

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