ADMIS News
COCOA
March cocoa traded to a new contract high yesterday, negating last week’s key reversal and leaving the long-term uptrend intact. West African growers are seeing significant production problems, with recent heavy rains leading to the spread of black pod disease in Ghana, Nigeria, and Cameroon. Ivory Coast arrivals are 30% behind a year ago. West Africa is about to enter its dry season, which may help to limit the spread of disease, but the dry season typically means a slowdown in pod production as well. El Nino could also bring heavy rainfall to Ecuador in the coming months that could damage trees and reduce their output. There may be a point where high cocoa prices will shut off demand, but there has been no indicator of that yet. Lower inflation rates in the US and EU could offset that effect.
COFFEE
March coffee’s inability to follow-through on Monday’s outside-day higher close may signal a loss of upside momentum. With the market heading into a holiday tomorrow and low volume expected on Friday, it may be vulnerable to a more substantial pullback. Recent rainfall over major growing regions of Brazil should improve the prospects for the 2024/25 Arabica crop. In addition, the USDA increased its production forecast for Brazil’s 2023/24 crop to 44.9 million bags. ICE exchange coffee stocks rose by 1,035 bags on Tuesday, which was their first daily increase since reaching a 24 1/2 year low earlier this month. All of Tuesday’s increase consisted of coffee that had passed the exchange grading process at Hamburg or Bremen warehouses. Keep in mind that 3,365 bags of coffee (76% of those that were graded on Tuesday) failed to be approved. The robusta harvest in Vietnan is believed to be 15-20% complete.
COTTON
Cash traders are citing low demand for textiles and a buildup in yarn stock as a reason to not hold out much hope for a more significant rally in cotton. Others have mentioned the nearly perfect weather for harvest this year in the US, with harvest progress as of Sunday reaching 77% complete versus 74% on average. Talk of Brazilian growers switching to cotton from soybeans due to hot and dry weather has also been a source of pressure this week. The Cotton Association of India is projecting total Indian cotton supply for 2023/24 at 345 lakh bales, down from 355.40 for 2022/23. This consists of beginning stocks of 28.90 lakh bales, cotton pressing of 294.10 and imports of 22.0. The import number is up from 12.50 lakh bales in 2022/23. The Dollar Index extended its decline on Tuesday, falling to its lowest level since September 1, and this helps make US cotton more attractively priced on the global market. The recent rally in the equity markets supports the market on ideas it will improve the demand outlook.
SUGAR
This week’s rebound in the sugar market has lifted prices to within 0.40 cent of a new 12-year high. In a report released yesterday, the USDA said it expects EU sugar production to grow 3% in 2023/24, with a strong crop in the eastern Europe more than offsetting a drop in France. EU beet sugar production was forecast at 15.5 million tonnes, with increased plantings in Poland, Romania, Slovakia, Hungary, as well as Spain. EU is the world’s third largest sugar producer and the fifth largest importer. USDA lowered Brazilian production by 1 million tonnes to 41 million and Thailand by 1.8 million tonnes to 9.4 million. They left India unchanged at 36 million tonnes, which is up 4 million from last year. Louis Dreyfus’ head of physical trading said on Tuesday that sugar prices need to rise above the current 12-yer highs to curb demand and balance the market. He pointed out the backlog of shipments out of Brazil and stated that that world needs about 3.5 million tonnes per month, but that Brazil can only export at best 3 million. The rains in Brazil and the forecast for more wet weather in the coming days could cause some mills to end operations for 2023. The start of the rainy season in late November/early December typically signals the end of cane harvesting and crushing for the season.
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