COFFEE
September Coffee broke below its recent consolidation overnight and traded to its lowest level since July 9. The tight robusta market, which has supported rallies in both the London (robusta) and the NY (arabica) futures, might be starting to loosen. Robusta premiums in Indonesia have been slipping this week, as the harvest is ongoing. Cash trade in Vietnam remains quiet with few offerings, and their harvest is still a few months away. The weather has been better this year, and anecdotal comments from growers have indicated that output has improved significantly. In their last update, USDA put Indonesia’s 2024 robusta production at 9.5 million bags, up from 6.8 million last year and tied with the previous seven year high from 2022. Indonesia is the third-largest robusta producer after Vietnam and Brazil. Dry conditions continue in Brazil, with no rain expected in the key growing regions. The has helped advance the harvest, but it has also raised concerns about yields. ICE arabica stocks increased by 9,021 bags yesterday to 818,230. This was the largest they had been since July 3, and it was the largest single-day increase since June 4. The fund net long was at near-record levels recently, which leaves the market vulnerable to heavy selling if support levels are taken out.
COCOA
September Cocoa was higher overnight after the North American second-quarter grind came in better than expected, with a 2.2% gain from a year ago at 104,781 metric tons versus expectations for a steady to lower number. On the whole, this latest round of grind data has pointed to resilient demand in the face of high prices. Last week, Europe’s second quarter grind number surprised the market with a 4.1% gain from last year after being 2.9% lower in the first quarter. The Asia second quarter grind released early yesterday 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 and was not a surprise.
There was some sobering news yesterday regarding the fight against swollen shoot disease in Ghana and Ivory Coast. The International Cocoa Association reported that the Western North region of Ghana was 81% infected. In 2023/24 the region produced 54,690 metric tons of cocoa, about 13% of the nation’s total. This was down from 82,796 the previous year and 101,824 two years prior. To combat the disease, infected trees need to be ripped out and the soil needs to be treated before replacement trees can be planted. It takes two to four years before newly planted trees become productive. Earlier this year, the chief executive of the Ghana’s industry regulator warned that 500,000 hectares were infected across the nation. ICCO said also that swollen shoot is spreading in Ivory Coast, with estimates as high as 30% infected.
COTTON
December Cotton is slightly lower this morning but inside the range of the previous two days. US crop conditions have stabilized, and recent rainfall in key growing areas suggest the potential for improvement this week. The fund net short has reached near-record levels, which may have made traders reluctant to push the market below 70.00, but the weather does not seem to be offering much of a threat to this year’s crop. Demand is a concern in the wake of disappointing economic data from China this week. Export sales showed a modest improvement this week.
The weekly US Drought Monitor showed roughly 16% of US cotton production was in an area experiencing drought as of July 16, which was an improvement over 18% from the previous week. A year ago, 17% of the crop was experiencing drought, and that number jumped to 37% by August 29 and 41% by September 26. The coastal rains in the Carolinas allowed for some improvements to the moderate drought and abnormally dry conditions here. The NWS 1-5-day forecast calls for moderate to heavy rain in southeast US and the Delta and much of Texas, with west Texas expected to see light to moderate rain. The 6-10 and 8-14 day forecasts show above normal chances of rain across the entire cotton belt.
SUGAR
October Sugar was lower overnight, and it looks poised to extend lower today. Yesterday, Czarnikow raised its 2024/25 global sugar production forecast to 189.7 million metric tons, up 3.2 million from its previous estimate. They put global consumption at 180.8 million tons, which would result in a production surplus of 8.8 million, the highest since 2017/18. They pointed to increased output from India, Thailand and EU that would more than offset an expected decline from Brazil. India’s production was estimated at 33.7 million tons, up 2.2 million from last year. Dry conditions have returned to Center-South Brazil this week, which could keep harvest and production going at strong pace, but the dryness this year has raised concerns that it will eventually hurt production, eventually. Monsoon rains in India could bring flooding to some areas, but on the whole, conditions have been conducive to cane production. Thailand has seen good rainfall as well.
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