Higher Dollar Makes US Cotton Less Competitive

COTTON

A decline in US cotton crop conditions this week may support December Cotton after it fell to its lowest level in 19 months yesterday. The dollar reached its highest level since May 14, which makes US cotton less competitive on the global market. The Weekly Crop Progress report showed 56% of the US cotton crop was rated good/excellent as of Sunday. This was down from 61% the previous week but up from 49% a year ago. Texas was rated 44% good/excellent versus 53% last week and 30% a year ago. Georgia was 59% good/excellent versus 57% last week and 66% a year ago. The crop was 80% planted as of Sunday versus 78% a year ago and a five-year average of 80%. The decline in Texas’ conditions could make the trade focus more on the hot weather heading for the region. However, this is mitigated by the normal to above normal precipitation in the 6-10 and 8-14 day forecasts for west Texas. For the USDA supply/demand report on Wednesday, a Bloomberg survey has an average trade expectation for  US 2024/24 cotton production at 16.20 million bales, with a range of expectations from 16.00-17.60 million. The average expectation is unchanged from last month and up from 12.07 million in 2023/24. Exports are expected around 13.14 million bales versus 13.00 last month. Ending stocks are expected around 3.9 million versus 3.7 million last month and 2.40 million for 2023/24. World ending stocks are expect around 83.51 million bales versus 83.01 million last month and 80.48 million in 2023/24. Traders will be watching US economic data this week, as any indication that the Fed will be inclined to postpone rate cuts would support the dollar and undermine US export prospects. But on the other hand, a consistently strong US economy should be supportive to domestic demand. CPI and FOMC meeting results are on Wednesday and PPI on Thursday.

COCOA

After a one-day selloff, September Cocoa recovered overnight, and it looks like it can test Friday’s five-week  high today. The two largest producers, Ivory Coast and Ghana, are looking at below normal rainfall forecasts out through the next two weeks. Rains were below average in most of Ivory Coast’s main growing areas last week, but farmers in the southern region said enough may have fallen over the weekend to help the development of the mid-crop. In Nigeria and Cameroon, farmers are reporting insect damage and delays arrivals of government-provided pesticides. Estimated cocoa arrivals at Ivory Coast ports totaled 29,000 for the week ending June 9, down from 32,000 for the same week last year. Cumulative arrivals for the 2023/24 marketing year, which began in October, have reached 1.537 million tonnes, down 28% from the same period last year.

SUGAR

The sugar market had a lackluster response overnight to the International Sugar Organization widening its forecast for the 2023/24 global sugar deficit to 2.95 million tonnes from 689,000 in its previous estimate in February. Global production was revised to 179.3 million tonnes from 179.7 previously, a drop of 400,000, whereas consumption was revised to 182.2 million from 180.4 million previously, an increase of 1.8 million. Brazilian production was held steady at 44.5 million tonnes. There were downward revisions for North America, but that was offset higher estimates for Thailand and China. This pulls the global stocks/usage ratio down to 53.5% from 54.6% previously. The global deficit for 2022/23 was increased to 1.15 million tonnes versus 308,000 previously. India has received 36.5 millimeters of rain so far this monsoon season which is 3% above the “normal” amount 35.5 mm, according to the India Meteorological Department. The southern peninsular region got 79% above normal rainfall, and the northwestern region 42% below normal. The forecast for Center South Brazil shows very dry conditions over the next two weeks.

COFFEE

Vietnam’s coffee exports totaled 79,358 tonnes in May, down 47.8% from April and the lowest for that month in at least 15 years, according to government customs data. Total exports for January-May reached 817,514 tonnes, down 5.8% from the same period last year. Exports are expected to be insignificant until the new crop harvest begins in October. Growers in Brazil are expressing concern about small beans due to dry weather. Somar Meteorologia reported that no measurable rain fell in Minas Gerais last week versus an historical average of 10.2 millimeters (about ½ inch).  Widespread dryness is expected over most of the country over the next 4-5 day, according to Reuters. Some rain could reach the southern regions but will likely miss Minas Gerais.

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