Sugar Firms on Short-Cover Risk

SUGAR

March Sugar was higher overnight, and it could be in position to test the recent high at 15.05. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 3,251 contracts of sugar for the week ending October 7, increasing their net short to 135,026. This was still far from the record net short of -235,000, but it was still significant. With Friday’s close 1.89 cents below the close on that day, we suspect the net short is even larger by now. This further supports the idea that the funds were heavily oversold at the November lows and that the market could be vulnerable to short covering if resistance levels are taken out. World Weather Inc reports southern Thailand saw torrential rain and serious flooding over the weekend, but the area impacted was in the Malay peninsula, which is not their main cane production area. The market may have gotten oversold on the large production/large global surplus theme, as production forecasts have moderated a bit.

COTTON

March Cotton was higher overnight after falling to a new contract low on Friday. Last week’s export sales report showed a decent sales number of 198,985 bales for the week ending October 2. This was the second week in a row they were around 200,000 bales. Sales have only reached 39% of the USDA forecast versus a five-year average of 56% for this point in the marketing year, and the slow pace could eventually give USDA a reason to lower its forecast for the 2025/26 marketing year, but they may be reluctant to do so until the data is brought up up-to-date, and that will not happen until January. The next update will be Tuesday November 25 and it will cover the week ending October 9 and the trade may be reluctant to press lower until that report comes out. World Weather Inc. says West Texas precipitation today will be brief and light and that quality issues will be minor. Some additional precipitation is possible this week, but it will be light. They expect harvesting to advance around the precipitation but not as quickly as desired. The final USDA crop progress report for the season is expected to be released this afternoon. Last week’s report showed 71% of the US crop had been harvested versus 76% for the same week last year and a five-year average of 72%. Texas was 60% harvested versus 71% a year prior and an average of 66%. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 11,586 contracts of cotton for the week ending October 7, increasing their net short to 76,326. This was close to a record net short. With Friday’s low about 3.27 below the close on that day, funds may have a new record short by now.

COCOA

March Cocoa extended last week’s selloff overnight to trade to its lowest level since October 2024. The market is technically oversold, but there is no indication of a bottom. We have seen two weeks of Ivory Coast port arrivals above 100,000 metric tons, and traders will be watching to see if they can make three in a row today.  The last time a weekly number was above 100,000 was in 2022, when they did it for seven weeks straight during November and December. Arrivals tend to peak around this time of year. West Africa seasonal rains are slowly winding down. World Weather Inc says showers will continue mostly near the coast over the next ten days while net drying occurs farther inland. The dry season brings the Harmattan winds, which come down from the Sahara, and the severity of the wind can have a bearing on the mid and subsequent main crops. The next ICCO updates on the global supply demand balance should be released around December 1. ICE stocks fell 5,346 bags on Friday to 1.733 million, their lowest since March 14. They fell 33,299 bags last week.  Friday’s Commitments of Traders Report showed managed money traders were net sellers of 2,296 contracts of cocoa for the week ending October 7, reducing their net long to 2,474.  The is the smallest net long since 2023 and is virtually flat when compared to the record net long of 79,541 from September 2023.

COFFEE

March Coffee collapsed on Friday on the news that President Trump had removed the 40% tariff on Brazilian coffee imports. The market fell to its lowest level since September 25 but made a substantial recovery by the end of the day and was slightly higher overnight, though still inside Friday’s range-down action. Exporters are expected to divert some of their some shipments that are currently headed for Europe back to the US. Some traders were surprised how sharp the break was, as they still view global supplies as tight. 2025/26 is an off-year for Brazilian production. Brazil coffee areas received rain over the weekend, and more is expected, which is good for the 2026/27 crop. Heavy rains and flooding in Vietnam continue to raise concerns about their crop in some areas. The Trump Administration has lifted the tariff on green coffee from Brail but has retained the 50% levy on instant coffee, and Brazilian producers fear they may lose that market. The US accounts for 20% of Brazil’s instant coffee exports, according to the Brazilian Instant Coffee Association (ABICS). ICE certified stocks increased 3,424 bags on Friday to 402,069, their highest since November 14. Stocks increase two out of five days last week for a net decline of 1,121 for the week. This was the first time since September there were two or more days in which stocks increased. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 2,209 contracts of coffee for the week ending October 7, increasing their net long to 42,802. This was the biggest net long since April. Friday’s close was about 10.00 above the close on that day, suggesting the net long has not change much.

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