GLP-1 Dampens Sugar Demand

SUGAR

March Sugar fell to new contract lows yesterday and right to the September low on the nearby chart, as the market continued its to focus on oversupply and strong production forecasts for Thailand, India, and Brazil. The demand outlook is undermined by the increasing popularity (and apparent success) of GLP-1 weight loss drugs at limiting appetites for sugar. The latest estimate from Brazil showed that nation’s cumulative sugar production was up 0.8% from last year, which is a remarkable recovery from June, when it was 15% behind. Cane crush is down 3.0% from last year and ethanol production was down 8.8%, as the industry has favored sugar. There was a story last week that Brazilian crushers were starting to focus more on ethanol this month in order to help rebuild the nation’s ethanol stocks, which if true, may show up in the next report, which will cover the first half of October. Crude oil is higher this morning, which offers mild support to sugar. In an interview with Bloomberg News Tuesday, Coca-Cola’s Chief Financial Officer John Murphy said the company is beginning to produce Coke made with American cane sugar, but that capacity it is limited by the US supply and the ability to ramp up production in glass bottles.

COFFEE

December Coffee gapped higher overnight and traded to new contract highs. An escalating dispute between President Trump and the President of Colombia are threatening to interrupt coffee supplies from the US’ second-largest supplier. Yesterday Colombia recalled its ambassador from Washington after Trump said he would raise tariffs on the South American nation and stop all payments to it. The US currently imposes 10% tariffs on Colombian imports. According to the USDA, in 2023, about 35% of US unroasted coffee imports came from Brazil and 27% from Colombia. In the meantime, there has been only slight progress towards reaching an agreement to lift the tariffs on Brazilian coffee. Trump and his counterpart Luiz Inacio Lula da Silva have reportedly had a cordial discussion over the phone a couple of weeks ago, and both sides have expressed interest in meeting to discuss a trade agreement. The slow arrival of seasonal rains in Brazil is also raising concerns about flowering and pollination for the 2026/27 crop. World Weather Inc. says next week’s rain should be a little more frequent and a little more supportive of improving crop development and soil moisture. Tropical Storm Fengshen is not expected to bring damaging winds when it impacts central Vietnam during the next few days.  Most of the heaviest rain will fall near Da Nang and Hue and should miss key coffee areas in the Central Highlands.  ICE certified stocks were unchanged yesterday at 468,410 bags.

COTTON

December Cotton has seen a bounce over the past week, but it has run into resistance at the 0.382 retracement of the selloff from the September high to this month’s low. Recent optimism that a trade deal with China could boost US export sales was dealt a blow yesterday when President Trump expressed some doubt over the chances of a meeting with Chinese President Xi Jinping next week. This could be posturing  ahead of the meeting or perhaps an attempt to lower expectations a bit. Soybeans are the main focus, but cotton exporters could also use some help. China appears to have a strong crop this year, which will lower their needs if true. Their US cotton purchases so far for 2025/26 are the lowest in at least 11 years, which does perhaps leave room for China to buy some. West Texas weather looks good for crop maturation and harvesting for the next 7-10 days. US Delta and southeastern states received rain over the weekend, and additional moisture is expected to fall this week, which could slow crop maturation and raise some short term concern over fiber quality in a few locations. Xinjiang, China crops are rated favorably, and good harvest progress is suspected. There have been no updates on US Treasury Secretary Bessent’s planned meeting with Chinese Vice Premier He Lifeng in Malaysia this week.

COCOA

December Cocoa broke through Friday’s high overnight and traded to its highest level since October 6. A 26% price decline in just two months may have pushed the market too low off of improved crop prospects and expectations for lower demand. The third quarter grind data release last Friday was not as bearish as expected, particularly for North America, which showed an increase from a year ago. Weather conditions have certainly improved in West Africa, but Ivory Coast arrivals have been slow. It is also possible that the dry spell in late August/early September slowed the arrival of the new crop. Growers seem very optimistic about the production later this season. The European Union has proposed granting six months of leeway to comply with its deforestation rules, rejecting a longer delay of one year that had been previously proposed. (The current official deadline is the end of this year.) This could interrupt cocoa deliveries to a major market area. Both parliament and member states will need to sign off on the changes before the end of the year, and they have the right to propose amendments. World Weather Inc. says showers and thunderstorms are expected routinely through the next week from Ivory Coast to Cameroon and Nigeria.  All coffee and cocoa areas will be impacted periodically, and resulting rainfall should mostly be light to moderate. All areas will eventually be impacted and crop development should advance normally. ICE stocks decreased by 11, 934 bags yesterday to 1.858 million, the lowest since April 8.

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