Sugar Ahead of Pace

SUGAR

India has seen a resurgence into monsoon rainfall this month that is easing concerns about the upcoming cane crop. According to the state-run India Meteorological Department, monsoon rains started withdrawing from the northwest of the country on Monday, more than a week later than normal. This is helping reduce the precipitation deficit after the driest August in more than a century. Rains so far in September have been 17% above average. Expectations of a very large delivery against the expiring October ICE futures have weighed on prices this week, as that would provide more evidence of ample near-term supply from Brazil. The latest Unica Center-South bimonthly supply report will be released midway through today’s trading, and it is expected to show this season’s sugar production and cane crushing have remained well ahead of last season’s pace. The last four reports have shown sugar’s share of crushing above 50%. With crude oil prices having climbed $8 a barrel and gasoline 16 cents a gallon during the first half of September, mills may have been tempted to shift more of their crushing mix towards ethanol. There are reports that European beet growers are turning away from the crop due European Union rules limiting the use of certain pesticides that kill crop-damaging insects but are harmful to pollinators.

COFFEE

December coffee has fallen for four straight sessions, taking it to within striking distance of its August-September double-bottom, as well as the January low. The large Brazilian harvest is all but complete, and supplies are ample. The market saw a rally last week off concerns that a heat wave that was moving across Brazil would damage the upcoming crop, but rain and cooler temperatures are expected to move in on Thursday, which will bring relief. A recent pullback in the Brazilian real also weighs on coffee as it can encourage Brazilian growers to aggressively marketing their product. ICE exchange coffee stocks increased by 5,665 bags on Monday, which was the largest daily inflow since March. Stocks are still on-track for an eighth monthly decline in a row. The coffee market likely needs an improved demand outlook or some other weather problem to avoid a test of the January lows.

COCOA

Cocoa’s long-term supply outlook remains bullish, with the market looking at the potential for a third straight global production deficit in 2023/24. However, any dry weather brought on by El Nino has yet to materialize as a threat to the west African crop. Instead, farmers from Ivory Coast’s main cocoa growing region have said they need a sunny spell next month to strengthen their main crop and help fight black pod disease. Rain was below average last week, but soil moisture content was enough to help with the growth of the main crop, which lasts from October to March. Arrivals since the marketing began on October 1 have reached 2.329 million tonnes, down 5.3% from a year ago. However, there could be a surge in arrivals next week after higher minimum farmgate prices come into effect. A portion of this season’s decline could be due to more cocoa being diverted to domestic firms for processing. A group of Ivory Coast processers said that their August grindings reached 64,181 tonnes, up 9% from a year ago. Ivory Coast’s capacity is 712,000 tonnes per year, and they vie with Netherlands as the world’s top grinder.

COTTON

The weekly Crop Progress report showed 30% of the US cotton crop was rated good/excellent as of Sunday. Texas was 10% G/E, unchanged from the previous week and a new record low. The crop was 13% harvested. The fact that the crop is holding near record low conditions does suggest the USDA could lower the US production forecast in future supply/demand reports. The 6-10 and 8-14-day weather forecasts call for above normal chances of rain in west Texas, which could expose crops with bolls open to damage. However, the 1-7-day forecast calls for below normal precipitation across the entire US cotton belt. December cotton rallied yesterday despite a move in the dollar to its highest level since December. India’s monsoon rains have stuck around a week later than normal, which is helping reduce the precipitation deficit after the driest August in a more than a century. This could alleviate concerns about their cotton crop.

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