India Exports Add Pressure to Sugar

SUGAR

May Sugar was sharply lower early Wednesday on the news of the cease-fire, as the lower crude oil prices accompanying the news would theoretically lower the incentive for Brazilian cane crusher to focus more of their efforts on ethanol production and less on sugar. Prior to today’s action, the market had already endured a steep correction of the rally off the February low to last month’s high, with the overnight low taking the market below the 0.618 retracement level. Adding to the pressure was statement by India’s Food Secretary that the nation has no plans to curb sugar exports despite the recent reduction in production forecasts for the year. India has allowed exports of 1.59 million metric tons on the assumption production would exceed local demand, but some forecast this week had production falling below consumption this season. On the other hand, domestic sugar consumption is reportedly down because of a shortage of commercial gas cylinders that has forced restaurants to scale back operations during. On Tuesday, a private weather forecaster, Skymet, said it expected India’s monsoon rainfall to be below normal this year due to El Nino, which is expected to arrive in July-September.

COFFEE

May Coffee extended Tuesday’s selloff slightly overnight, but it has since moved back into Tuesday’s range and is slightly higher on the day. The cease-fire in the Iran war gives a boost to demand prospects, as the potential reopening of the Strait of Hormuz could reintroduce shipments of coffee to Persian Gulf nations, and area of the world that had seen demand growth. Expectations for strong Brazil crop this year on good weather and this being the “on-year” for their production cycle have limited the market’s upside prospects, but the harvest in May-June will tell the tale. Brazil exported 151,299 metric tons of green coffee in March, down from 219,190 for the same period last year. The expected arrival of El Nino later this year could bring dry conditions to Colombia, Central America, central Africa, and Indonesia, all important coffee growing regions.

COCOA

May Cocoa was higher early Wednesday perhaps on improved demand expectations with the cease fire and the potential reopening of the Strait of Hormuz.  Traders are looking ahead to the first-quarter grind data on April 16. Dealers have told Reuters they look for Europe’s grind to be down 2% to 4% and North America’s down 10% to 12% from last year. West Africa is seeing dry conditions this week but not enough to raise concerns about the upcoming mid-crop. El Nino is expected to arrive the latter half of this summer, which could bring dry conditions to west Africa and excessively wet in Ecuador. ICE cocoa stocks increased 28,661 bags on Tuesday to 2.446 million, their highest since September 4, 2024.

COTTON

May Cotton was sharply lower early Wednesday on the news of the cease fire in Iran and the steep selloff in oil prices, but the market managed to climb back near unchanged as the session progressed. Higher oil prices had been one of the supportive factors for this market, as this raises the cost of producing polyester, a key competitor to cotton, as well as raising the cost of production for cotton due to higher diesel and fertilizer costs. The other supportive factor has been the dry conditions over most of the US growing areas, with the last drought monitor indicating an area representing 94% of US cotton production was under drought. Some rain has reached south and west Texas and the Delta recently but so far not enough to change the profile. La Nina has a tendency to bring dry conditions to the southern US, and the transition to ENSO neutral conditions offers a chance for some relief and a more normal rain pattern. El Nino, which is expected to arrive in the latter half of the summer, could bring above average rain to the Texas and points west.

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