Cocoa Bulls Eye January Gap

COCOA

July Cocoa was lower early Tuesday after reaching its highest level since January 20 on Monday. The market has a gap from January 20 at 4783 that it came close to filling on Monday. This presents a target that the bulls will want to see filled. Cocoa has drawn support recently from concerns that high fertilizer prices will create a burden on growers and that the arrival of El Nino as early as June will lower global production. The bulls may have also taken comfort from the improvement in Asian grind stats for the first quarter, despite Europe’s numbers staying low. A Bloomberg story had farmers in Ivory Coast saying they will start applying fertilizers as rains subside. Ghana growers are still waiting for supplies to arrive from the industry regulator. El Nino is expected to bring drier than normal conditions to West Africa and Indonesia but not until later in the year and would more likely affect the 2027 main crops. “Super El Nino” stories are starting to show up in the general media. Ivory Coast farmers are complaining about low rainfall, telling Reuters this week that the patchy and below-average rains that continued last week are raising fears of a smaller and lower-quality mid-crop. They said the next two weeks will be decisive, as a lack of sufficient moisture could limit bean size and overall yields.

COFFEE

July Coffee was lower slightly lower early Tuesday after staging an impressive bounce off 10-month lows on Monday. Perhaps the sellers got anxious after the market failed to attack the lows from last July. The upcoming Brazilian crop is expected to be strong, but Brazilian sellers may be reluctant to price their product when their currency is at its highest level relative to the US dollar in more than two years. The trade may also be waiting for updates on harvest progress. (Brazil’s arabica harvest traditionally begins around May.) Estimates vary, but Brazil’s arabica production is expected to be around 30% higher this year, and their total coffee production is expected to reach a new record.

COTTON

July Cotton was lower early Tuesday after reaching a new contract high overnight. The crude oil market was higher on President Trump’s comments that the ceasefire with Iran was on “life support,” and this may have brought in some new buying for cotton. But with the market facing the USDA supply/demand report later in the session, traders likely became more cautious. This will be the first official update for the 2026/27 season, and the trade is expecting lower production and ending stocks numbers this year despite higher plantings, and this is due to the widespread drought that is affecting an estimated 98% of US cotton production. The 20-cent rally since mid-March is expected to bring planted are up from the USDA’s March prospective planting estimates, but it may take until the June 30 acreage report to reflect those changes. After today’s report, much will depend on the whether enough rains will arrive in time to change the outlook.

SUGAR

July Sugar rallied to its highest level since May 6 early Tuesday but was back to unchanged as the session progressed. The market may have drawn support from strength in the crude oil market. More analysts seem to be turning bullish towards sugar on expectations that Brazil’s will be limited due to an increased focus on converting cane to ethanol, the possibility that the upcoming El Nino event will bring drier conditions to key producers in Asia, and that higher fertilizer costs will lower inputs as well. Citibank analysts pointed out the fertilizer accounts for 20%-25% of production costs. France’s agriculture ministry put that nation’s sugar beet plantings for 2026 at 378,000 hectares, down 5% from last year and 5.3% below the five year average.

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