50% Coffee Tariff Could Jolt US Demand

COFFEE

Higher retail coffee prices in the US that will result from the 50% tariff on Brazilian imports could ultimately pressure demand. J.M. Smucker, which owns Folgers and Café Bustelo, said this week that it would continue raising coffee prices to help offset rising costs from tariffs. The company has raised coffee prices twice this year to recoup some of its own higher costs. On the other hand, if a carve out is made for coffee imports, it could encourage producer selling. (No mention has been made of one.) The harvest there is nearly complete. In the meantime, the ever-tightening ICE certified stocks provide support. Stocks fell another 1,642 bags yesterday to 714,936, their lowest level since May 10, 2024 on the tariff threats.

COTTON

The cotton market rally was undercut yesterday by the weekly export sales report, which showed USDA cotton export sales for the week ending August 21 improving over the previous week but far from stellar. Net sales came in at of 79,333 bales, up from 105,373 the previous week but below the 243,000 from August 7. Cumulative sales for 2025/26 have reached 3.412 million bales, down from 4.306 million at this time last year and the slowest since 2015/16. Sales have reached 30% of the USDA forecast versus a five-year average of 47% for this point in the marketing year. Vietnam was the largest buyer this week at 88,386 bales, followed by Bangladesh at 37,798 and Pakistan at 13,325. India was #8 at 4,696 bales. Vietnam is the largest buyer so far for 2025/26 with commitments of 713,497 bales. They are followed by Pakistan at 455,759 and Mexico at 410,093. India is the 13^th largest buyer at 57,424. Sales to India may gain attention in the weeks ahead as the government there has exempted cotton imports from the 11% import duty out to the end of December. This is designed to support their garment industry, which has been hit by the US tariffs. Industry officials told Reuters that the cotton is likely to be sourced from Australia, Brazil, Africa and the US. US crop conditions have been running well above average this season, but they may have started to slip and may show another decline this week, especially in the Delta. The US Drought Monitor showed approximately 30% of US cotton production was in an area experiencing drought as of August 26, up from 22% the previous week and the highest since April 1. Arkansas, Tennessee, and Mississippi all saw expansion in their drought areas. Topsoil moisture was rated more than one-half very short to short on August 24 in Arkansas (92%), Tennessee (63%), and Mississippi (53%). World Weather Service expects rains int west Texas this weekend to help improve soil moisture a bit. Cooler than normal temperatures will slow plant development, which could make the crop more susceptible to an early frost. A similar situation could be developing in Xinjiang, China.

COCOA

December Cocoa was inside yesterday’s range overnight as it continued its consolidation pattern. World Weather Service say isolated to scattered showers will occur most days during the next week from Ivory Coast through Nigeria and Cameroon.  Much of the region will receive at least some rain, but it will likely be too light and infrequent to prevent net drying in many areas. Sources told Bloomberg this week that cold and dry weather is slowing down plant development in Ivory Coast and that a lack of sun sunshine is breeding black pod disease in Ghana and Nigeria. Some Ivory Coast farmers interviewed by Reuters have also complained about the lack of heat, but in general farmers have indicated that pod development is still good. These anecdotal crop reports have been mixed, but the complaints about a lack of heat appear to be increasing. The main crop harvest is approaching. Demand is a concern after the disappointing second-quarter crush numbers. Third quarter data will be released in October.

SUGAR

The UNICA report on Brazilian Center south sugar production for the first half of August will be released today. The last report showed center-south production for the second half of July was -0.8% from a year ago, and cumulative production to that date was -7.8%. Total crush for the period was -2.7% from a year earlier, and cumulative crush was -8.6%. Sugar’s share of crush was 54.1% during the second half of July versus 50.3% a year earlier. Year-to-date share was 52.1% versus 49.1% for the same period in 2024. Production typically peaks for the year in the second half of July. The current crop may feeling the effects of last year’s drought and the wildfires last September. Hot and dry weather in the forecast for Sao Paulo state next week poses a similar threat. Reuters said data from the crop monitoring service EarthDaily showed a deterioration in the vegetation index readings in some areas. Other parts of the center-south, including Parana and Mato Grosso do Sul, have seen decent rainfall this month, to the point where it may have disrupted harvesting. Perhaps that will show up in today’s UNICA report. The UNICA report today could offer a chance for a rally if it continues to show a deterioration from last year.

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