Large Brazilian Coffee Harvest Expected

COFFEE

July Coffee was near unchanged early Thursday as the market continued to consolidate around lowest level since last summer. The arabica harvest in Brazil is just getting underway, and it is expected to be quite large. This is the “on-year” in the crop’s biennial cycle, and growing conditions were viewed as favorable for a strong crop. A note from Rabobank suggested that it was “just a matter of time” before the coffee market transitions into a large surplus and lower prices. An executive for EISA, the Brazilian arm of global soft commodities trader ECOM, said on Wednesday that Brazil will export a record volume of coffee in the new crop year that starts in July because of likely all-time-high coffee production. They estimate that around 5% of the Brazilian crop this year had been collected. There are some concerns about El Nino potential effect on next year’s crop. A tendency towards warmer conditions, could limit damage from frosts during the Southern Hemisphere winter, but the added heat could also hurt the flowering stage in September-October.

SUGAR

July Sugar was higher early Thursday but inside Wednesday’s range and right in the middle of the range it has established this month. The market is garnering support from ideas that El Nino will hamper output in 2026/27, particularly in India and southeast Asia. India is expecting this year’s monsoon rainfall to be below normal. However, above normal monsoons the previous two years have created some cushion in the water tables. Beet planting in Europe are lower this year. And higher energy prices are driving the narrative that cane crushers in Brazil will focus more on ethanol and less on sugar this year. Earlier this week, Czarnikow projected a surplus of 1.4 million metric tons for 2026/27 season, thanks largely to increased output from China. They warned that this could be undone if El Nino causes even marginal production losses or if top grower Brazil diverts more cane to ethanol production rather than sugar.

COCOA

July Cocoa was near unchanged lower early Thursday and continued the sideways pattern of the previous three  sessions. The market gapped lower on Monday and has yet to fill that gap. Cocoa rallied to its highest level in four months during into mid-May on drier than normal conditions in west Africa and concerns the upcoming El Nino event would hurt prospects for next year’s crop, but the market may have gotten ahead of itself, as the conditions do not appear to be bad enough to prevent a strong mid-crop. World Weather Inc. expects daily occurrences or rain and thunderstorms through the next week in parts of the cocoa region from Ivory Coast to Cameroon and Nigeria, with all areas eventually impacted by rain multiple days during the period. A Reuters article suggested that more candy makers will be encouraged to increase the amount of cocoa in their products now the prices are have fallen so far from the 2024 peak. However, that may require cocoa prices to stay low.

COTTON

July Cotton was sharply lower early Thursday, taking out last Friday’s low and falling to its lowest level since April 30. Some relief has come to drought-stricken areas of the US cotton belt, which could be changing the market’s psychology. World Weather Inc. says west Texas rainfall potentials are rising for the coming week as daily showers begin to pop up. That will be very important since moisture is needed for planting and emergence. Much greater rain will still be needed especially in dryland production areas, but the chance of that occurring appears to have improved. World Weather Inc. said a ridge of high pressure along the US Atlantic coast and broad trough of low pressure over the central and western states are expected to bring a stagnant weather pattern from the second half of this week through the first half of next week from central and eastern Texas through the Delta to the lower and middle Ohio River Valley, which promises to produce frequent waves of rain that will eventually saturate the soil and cause some flooding, which could cause damage. There is also the issue of fertilizer usage. A survey by the American Farm Bureau Federation found that most farmers could not afford all the fertilizer they need for this growing season. Farmers in the Midwest prebooked fertilizer for 2026, that does not appear to be the case in the South. The trade is probably not looking to the export sales report for support today. Weekly reports have been disappointing lately.

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