ADMIS News
COFFEE
July coffee broke out of a two-week consolidation on Friday and traded to its highest level since May 2, leaving an upside target of 216.95. The market drew support from a USDA report that projected coffee production in three Central American nations to be relatively stable in 2024/25 but at historically low levels. USDA blamed exchange rate challenges, persistent labor issues, and above-average precipitation. Guatemala is the fourth largest producer in the world, and their 2024/25 production was forecast at 3.25 million bags, down 100,000 from 2023/24. Costa Rica’s production was forecast at 1.18 million bags, stable with 2023/24. El Salvador’s was projected at 560,000 bags, up 5,000 from 2023/24, but well below the peak of almost 3 million from 20 years ago. Insufficient rainfall in Vietnam and Brazil was also supportive. ICE exchange arabica stocks increased by 10,505 bags on Friday to reach a new 2024 high.
COCOA
July cocoa appears to be resuming its selloff with its move below the May 3 low overnight. The market is holding right around 100-day moving average support at 6870 after trading below it early this morning. The shift towards wetter weather over West African growing areas should help improve soil moisture levels following the region’s dry season, which ended in March, and this could help improve West African production during the late mid-crop and into next season’s main crop. Ivory Coast’s Coffee and Cocoa Council has suspended around 40 cooperatives which they suspect were illegally hoarding cocoa beans to sell them at a higher price to exporters struggling to fulfill their contracts. If those co-ops can be forced to market their cocoa to lift their suspension, it may provide some relief to Ivory Coast exporters.
COTTON
The cotton market is struggling to establish a low. US weather is benign, and the US crop appears to be well positioned for a recovery from last year. Soil moisture in west Texas is much better than it has been for the past couple of years. US cotton plantings were proceeding at an average pace as of last week’s Crop Progress report. This pace may have slowed down in the Delta and southeastern US last week due to heavy rains, and this could show up in this afternoon’s Progress report. With prices down 28% from their peak in February, there is not much of a premium built into the market, which could be an issue if a weather problem develops. US export sales last week slipped from a strong number the previous week, but they have been running at a decent clip for the past month. Strong equity market action and recent indication of an improvement in China’s economic outlook are bullish for demand. The decline in the dollar off the May high also helps US export prospects.
SUGAR
July sugar reversed higher overnight after failing to test last Thursday’s 14-month low. The nearby contract fell below the 50% retracement of the rally from the 2020 low to last November’s high last week, and that level could be key resistance as a close back above it would suggest a correction of the selloff is underway. The market received bearish news from Brazil last week, with the UNICA report showing Center-South sugar production for the second half of Brazil running 84% above the same period last year. Dry conditions help harvest and crush operations, but they could eventually pull yields down. With the departure of El Nino expected this summer, India is expected to see above-average monsoon rainfall this year, which should benefit their 2024/25 cane crop.
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