Dryness Concern for Brazil Sugar Crop

SUGAR

October Sugar was moderately higher overnight but inside last week’s range. The market found support late last month around the 18.00 level, probably because of uncertainty over the Brazilian crop due to the extended dry pattern there. Below average rainfall is expected to eventually weigh on production, but producers have suggested that yields could start to improve seasonally as more new crop cane is crushed. A fire has caused the suspension of sugar loading on piers 2 and 3 at the Tiplam terminal at Brazil’s Port of Santos. Tiplam was expected to load 13 vessels with 800,000 metric tons of sugar over the next two weeks. Most of those loads were to go to China. Thailand is expected to see an improvement in output this year provided rains come in a timely manner. Cumulative rainfall totals slipped to below normal last week, but they are expected to be back to above normal by early July. India’s monsoon has started to advance again after stalling for a week or so, and the is expected to bring heavy rains and flooding in some areas. Producers have been counting on a better than average monsoon replenish reservoirs. Drought in the Black Sea region could affect beet production. The Brazilian real fell to its lowest level since April 10 last week, which puts additional pressure on crushers to sell sugar for exports.

COFFEE

September Coffee is higher this morning after a two-day selloff at the end of last week. The market has been in a sideways pattern for almost four weeks, but it has held its uptrend off the May lows. BMI said on Friday that coffee prices have gained on soft Vietnamese exports and below trend rainfall in Brazil. Vietnam coffee exports for the first five months of 2024 were down 5.8% from a year earlier as growers have been reluctant to sell. The Mercantile Exchange of Vietnam expects 10-15% decline in coffee output this year because of the extreme heat that Central Highlands experienced between March and early May. Recent rains have improved the outlook, but some growers claim it was too late. USDA has kept their forecast for Vietnam steady at 30.230 million bags. Safras & Mercado on Friday put Brazil’s harvest percentage at 44% complete, up from 37% a week prior and ahead of 39% a year ago and the five-year average of 40%.  Arabica harvest was 35% complete versus 31% on average and robusta 62% complete versus 59% average.

COTTON

December Cotton was higher overnight, as the market seems to be banking on the possibility that a seasonal low was put in last week. Traders may have viewed 70 cents as too cheap this early in the season, especially with the UDSA Acreage report looming on Friday. Not that there is too much to be bullish about on the production front. Tropical Storm Alberto brought some needed rains to southern and western Texas and the Coastal Bend region. Soil moisture in west Texas is much better than it has been over the past two years, but it has stopped improving over the past couple of weeks. Crop conditions have leveled off as well, and the trade could take direction from tonight’s update. Last week’s report showed 54% of the US crop was in good to excellent condition, down from 56% the previous week but up from 47% a year ago and ahead of the ten-year average of 49%. Texas was 43% G/E versus 44% the previous week, 30% a year ago, and 36% on average. For Friday’s acreage update , a Reuters poll has an average trade expectation of 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 6-10 and 8-14-day forecasts have much above normal temperatures in the southeastern US and the Delta, with above normal in west Texas. Rainfall in Texas is above normal in the 6-10 day and normal in the 8-14 day. The Indian Monsoon is advancing after stalling for a week, and it could bring heavy rains and even flooding to some areas.

COCOA

September Cocoa has extended last week’s selloff this morning and has traded to its lowest level since May 29. Prices have softened over the past week as the weather has improved in west Africa. Forecasts have above normal chances of rain in west Africa and Indonesia over the next 15 days. The crop is not out of the woods yet, but better rain now could improve yields for the late mid-crop. ICCO said on Friday that they will have to wait for pod-counting surveys in late August to mid-September to make an initial estimate of the supply balance for 2024/25. This leaves the weekly cocoa arrivals report as a fundamental input, which will probably come later this morning. As of last week, cumulative arrivals for the 2023/24 marketing year had reached 1.562 million metric tons, down 28% from 2.166 million a year prior.

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