Rains Improve Cotton Crop Outlook

COTTON

December Cotton was slightly higher overnight, following Friday’s steep selloff. Recent rains in the southeastern US have eased drought conditions there, and west Texas is seeing some rain as well, and this eases concerns about the US crop this season. World Weather Service reports that west Texas will benefit from coming rain and mild temperatures but that warming will eventually be needed. They also said wetter weather in the southeastern United States and Delta should be welcome for a while as long drier and warmer conditions return again later this month or early next. The market may have seen additional pressure on Friday from  a selloff in equities and crude oil as well as a stronger dollar. The stock market and crude oil are near unchanged this morning, and the dollar is slightly weaker. The Commitments of Traders report showed managed money traders were net buyers of 223 contracts of cotton for the week ending July 19, reducing their net short to 40,226, which is still in the vicinity of the record net short of 47,428 from August 2019. The rain this past week may bring an improvement in this afternoon’s crop conditions report. Last week’s report showed 45% of the US crop in good/excellent condition, unchanged from the previous week and this time last year but below the 10-year average of 51%.

COFFEE

September Coffee broke below recent consolidation on Friday and traded to its lowest level since July 9. Robusta premiums in Indonesia were lower last week with the advance of the harvest. The weekly Commitments of Traders report showed managed money traders were net sellers of 3,892 contracts of coffee for the week ending July 19, reducing their net long to 62,933. Despite the selling this last week, the net long was still relatively close to the record high of 71,811 from April, which leaves the market vulnerable to more long liquidation.  Brazil crop estimates are coming down on the expectations that the hotter and dry weather this year has hurt bean development. Safras and Mercado last week lowered its forecast for Brazil’s 2024/25 coffee production to 66.04 million bags from its previous estimate of 70.39 million. Robusta production was lowered to 20.7 million from 23.32 million previously and arabica to 45.3 million from 47.05 million previously.  The dry weather has allowed the harvest to advance  rapidly. As of July 16 it was 74% complete, up from 66% a year ago and above the five-year average of 70% for this time of year. Robusta harvest was 92% done versus 87% on average, and arabica was 65% complete versus 61% on average. Dutch bank Rabobank lowered its forecast for Brazilian production to 67.1 million from 69.8 million previously. ICE arabica stocks held steady on Friday at 9 818,230 bags.

COCOA

September Cocoa saw an outside day lower on Friday despite positive second quarter grind data for North America, as the recent mixture of sun and rain in west Africa has boosted crop expectations. The North American second-quarter grind was up 2.2% from a year ago at 104,781 metric tons, and Asia’s was down 1.45% from the same period a year ago at 210,968 tons. Europe’s second quarter grind data was released the previous week, and it was up 4.1% from a year ago at 357,502 after being 2.9% lower in the first quarter. The International Cocoa Association reported last week that the Western North region of Ghana was 81% infected with swollen shoot disease, but their production is expected to recover this year. Friday’s Commitments of Traders report showed managed money traders were net buyers of 944 contracts of cocoa for the week ending July 19, increasing their net long to 23,351. This is well short of the record net long of 79,451 than last September.

SUGAR

October Sugar extended its selloff overnight to trade to its lowest level since June 3, and it is approaching a 13-month low that it set in May. Last week, Czarnikow raised its 2024/25 global sugar production forecast to 189.7 million metric tons, up 3.2 million from its previous estimate, and they forecast a global 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. Brazilian sugar exports increased 50% in the first half of 2024 to 15.15 million tons. Dry conditions in Brazil have allowed a strong start to this year’s harvest, but they are expected to eventually pull production down. So far this season, production as reported in the bi-weekly UNICA reports has remained stubbornly high, with production as of June 30 running 15.7% ahead of last year. The Commitments of Traders report showed managed money traders were net sellers of 3,774 contracts of sugar for the week ending July 19, reducing their net long to 35,248. This is a small net long when compared to the 200,000+ in late 2023, and it does not pose a long liquidation threat.

Interested in more futures markets?  Explore our Market Dashboards here.