A Low For Cotton?

COCOA

Warm and wet conditions in West Africa this week have provided some optimism on the upcoming mid-crop. Drier conditions are expected in the week ahead, and cocoa needs sunny and dry spell intermixed with rain to develop properly and avoid disease. Soil moisture is still low. ICCO’s working group on stocks reported this week that world cocoa stocks at reporting depots fell 15% year on year in March, which was hardly a surprise. The US has asked the EU to delay its upcoming ban on imports of soy, wood and other commodities linked to deforestation. In a letter to the European Commission, US Trade Representative Katherine Tai, US Ag Secretary Tom Vilsack, and US  Commerce Secretary Gina Raimondo said US producers were struggling to comply with the law. This is similar to complaints by cocoa growers in West Africa and elsewhere, and if the US can impact the EU’s policy, it may ease concerns about cocoa logistics as well. The arrival of La Niña this summer or fall could bring excessive rains to West Africa and drought to Southeast Asia, which could cause trouble for upcoming cocoa crops.

COFFEE

September Coffee traded to its highest level since June 6 yesterday but closed well off the highs of the day, and the market was near unchanged overnight. Traders are citing persistent, tight supplies in Vietnam and concerns about small bean sizes in Brazil for the market’s strength. Some weather forecasters are warning of a frost risk in early July for Southern Brazil, including parts of Minas Gerias, the largest arabica producing region. In their biennial update released yesterday, the USDA projected 2024/25 world coffee production at 176.2 million bags, up from 169.2 million in 2023/24 and the highest since 2020/21. Brazil’s production was forecast at 69.9 million bags, up from 66.3 million in 2023/24, Vietnam’s at 29.0 million from 29.1 million, Colombia’s at 12.4 million up from 12.2, and Indonesia’s at 10.9 million from 8.15. World arabica production was increased to 99.9 million bags from 95.7 million in 2023/24, which would be the highest since 202/21. Robusta production was forecast at 76.4 million bags from 73.5 million in 2023/24, but it would still be below 2020/21 (74.4 million) and 2021/22 (77.9 million). World consumption was projected at 170.6 million bags, up from 167.5 million in 2023/24 and world ending stocks at 25.8 million, up from 23.9 million in 2023/24 but the second lowest in at least five years.

COTTON

The spike low in December cotton this week has brought some hope that the market has finally put in a low. The market fell back yesterday and overnight. The dollar reached its highest level since May 1, which lowers US export prospects, and traders may be looking to today’s exports sales report for direction. Last week’s report showed net sales of 177,100 bales for the 2023/24 (current) marketing year and 177,400 for 2024/25  for a total of 354,500. That was up 192,700 the previous week and was the highest since May 2. Cumulative sales for 2023/24 had reached 108% of the USDA forecast for the marketing year versus a five-year average of 112% for this point in the season. Next up is the June 28 USDA Acreage report, which will provide a more definitive idea for plantings this season after the Prospective Plantings report in March. The Indian monsoon has started to advance again after stalling for a week, which will help bring down temperatures in the north and increase rain coverage. The weekly US Drought Monitor showed 9% of US cotton production was within an area experiencing drought as of Tuesday, up from 8% the previous week but down from 16% a year ago and 55% two years ago. World Weather Inc. says West Texas looks dry for much of the coming week with scattered showers possible late next week. South Texas and the Texas Coastal Bend received some much needed rain in the past two days with 1-3 inches reported and local amounts over 5 inches.

SUGAR

The India monsoon is on the move again after stalling for a week, and that may ease concerns about their upcoming cane crop. This year’s monsoon had been expected to bring above average rainfall, but June’s totals will likely be below normal. Dry conditions in Brazil remain a concern, as this could pull yields down as the season progresses. Their harvest got off to a strong start, but the recent Unica report showed that Brazilian Center-South production for the second half of May was down 7.7% from a year ago. Total production for the first two months of the 2024/25 season was 11.8% higher than last year. World Weather Inc. says Thailand is expected to get a little more rain in the next two weeks, but this will still be lighter than usual. Their production is expected to see a recovery this year, but it will need better rain totals.

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