Cocoa Lower Overnight After Breakout Rally

COCOA

December Cocoa was lower overnight following yesterday’s breakout rally to its highest level in over a month. The Ivory Coast exporters association GEPEX said yesterday that the nation’s cocoa grind totaled 61,551 metric tons in August, which was down 11.1% from the same period last year. Cumulative grind for the 2023/24 marketing year had reached 587,531 tons by the end of August, versus 674,913 at that point in 2022/23, a decline of 12.9%. On Tuesday they reported a July grind of 57,149 tons, down 12.1% from a year ago. The International Cocoa Organization (ICCO) said today that global cocoa stocks dropped to 1.32 million metric tons in July versus 1.79 million at the end of the 2022/23 marketing year in September 2023. This would put the stocks/grind ratio at 27% in July, which would be the lowest in around 50 years. They look for production to recover in 2024/25, which begins next month but not a the level from two year ago.  Ghana has raised the fixed farmgate price paid to cocoa farmers by nearly 45%, effective yesterday. This move had been anticipated, and earlier this month sources inside the government had indicated that this would happen. This is a significant increase and is intended to boost farmer incomes and discourage smuggling. Farmer in Ivory Coast are hoping for an increase in their farmgate price. Rain returned to large parts of Ivory Coast and Ghana Tuesday where many areas benefitted from light to moderate amounts while many other areas across west-central Africa also received light to moderate rain. Isolated to scattered and occasionally numerous showers and thunderstorms will occur most days through the next week.  Resulting rain will be light to moderate most often and all areas will see multiple rounds of beneficial rain.  Southeastern Ivory Coast saw decent coverage over the last 24 hours, which they needed.

COFFEE

December NY Coffee was higher overnight following yesterday’s brief correction. London robusta coffee is approaching last month’s contract high. Hot, dry conditions in Brazil’s main arabica growing areas continue to concern growers, and there have been reports of buds falling from trees before flowering has occurred. Rains are needed to start the flowering process for the upcoming crop. World Weather Service does not expect the hot and dry pattern to change anytime soon. Some computer forecast model runs have been suggesting greater rain in the last ten days of September, but WWS is not convinced.  Robusta coffee areas in the Central Highlands of Vietnam are expected to experience frequent showers and thunderstorms during the next week, which is beneficial to their robusta crop. ICE arabica warehouse stocks increased by 4,340 bags yesterday to 854,594. The have reached their highest level since early 2023, but as recently as early 2021 they were above 2 million.  The hot and dry conditions in Brazil could support a rally back to last month’s contract highs.

COTTON

December Cotton was higher overnight after a strong rally yesterday. The trade is watching Hurricane Francine, which made landfall late yesterday and is expected to bring heavy rains into key growing areas of Mississippi. The question is how much damage the rain will cause. Some cotton could discolored and cotton may be strung from the boll, where rain is heaviest. Dry conditions ahead of the storm should have allowed aggressive harvest for mature crops. As of Sunday, 69% of Mississippi’s crops had bolls open. Weekly export sales will start out the session today, followed by the monthly USDA supply/demand update later this morning. Last week’s exports report showed net sales of 215,879 bales of cotton for the week ending August 29, which was the highest since July 25. Cumulative sales for the 2024/25 marketing year had reached 33% of the USDA forecast versus a five year average of 53% for this point in the season. For the supply/demand report, the average trade expectation for US 2024/25 cotton production is 15.31 million bales, with a range of expectations from 14.88 to 16.10 million. This would be up from 15.11 million in the August update. Ending stocks are expected around 4.68 million bales (range 4.10-5.25 million ) versus 4.50 million in August. World production is expected to come in around 114.75 million bales versus 117.64 million in August, and world ending stocks are expected at 77.46 million versus 77.61 million in August. China has increased its cotton production forecast to 5.72 million tons (26.27 million US bales) from 5.58 million in its August update. Their ending stocks are now projected at 8.13 million tons (37.34 million bales) versus 7.77 million.

SUGAR

March Sugar extended a recovery bounce from yesterday and traded to its highest level since September 6 overnight. The UNICA report on Brazilian sugar production for the second half of August will be released today. Analysts surveyed by S&P Global showed an average expectation for Center South sugar production at 3.26 million metric tons versus 3.11 million in the first half of August and 3.46 million a year ago. The previous report showed first-half August production was 10.2% behind 2023/24, but cumulative production since the marketing year began was up 5.4% from 2023/24. The trade is expecting production to continue fall behind a year ago levels and for cumulative production to eventually fall behind a year ago, due to the extremely hot and dry conditions experienced earlier this year and the lack of rainfall since. Some cane in Louisiana could have suffered damage from Hurricane Francine.  Drying in southern and west-central India will continue significant during the next ten days raising crop moisture stress for many unirrigated crops like sugarcane. French sugar marker Crystal Union says it expected its 2024 sugar beet harvest to yield 85 metric tons per acre, which would be in line with the five-year average. Hot weather in August helped boost yield after heavy rains delayed planting in the spring.

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