Sugar Falls on Weaker Crude

SUGAR

October Sugar has broken below a recent consolidation pattern early Friday after a setback in crude oil lowered expectations for ethanol production to draw of the cane crush away from sugar. Also, federal prosecutors in Brazil have launched a lawsuit to block the ethanol blend increase in gasoline to 32%, arguing more tests are needed. Last week, Brazil’s National Energy Policy Council approved temporarily raising the mandatory ethanol blend in gasoline to 32% for 180 days. Beet crops in France, Germany and Poland have been damaged by the drought. Parts of India seem to be experiencing too much rain while others remain dry. World Weather Inc. said heavy rains along the central west coast causing flooding and some property damage and that additional, excessive rain is likely in the northwestern part of the country. Southern Indonesia, southern Thailand and southern India will all continue to dry out.

COTTON

December Cotton was lower early Friday after closing higher for the previous four sessions. Lower crude oil prices may have encouraged some profit taking in cotton as well. Thursday’s export sales report was better than the previous week, but it was still quite low. However, the fact that China was the second largest buyer after being a small player for several weeks provided some optimism. China has been auctioning off their state reserves this week, and early reports were showing strong sales, which provide some optimism regarding demand.

COFFEE

September Coffee was slightly higher but near the low end of Thursday’s range. The market is back near the bottom of a three-week consolidation that followed a sharp rally off that was fueled by concerns about the state of Brazil’s crop. Heavy rains in June slowed the harvest of what was expected to be a bumper crop. Drier conditions have allowed harvest to advance, but it is still behind. In the meantime, old crop supply remain very tight. ICE certified arabica stocks fell 4,732 bags on Thursday to 315,883, their lowest since February 22, 2024. World Weather Inc. says some moderate rainfall has fallen this week in southern growing areas, and the main production area of Sul de Minas could see some this weekend before it dissipates. There is still no risk of crop damaging cold anytime in the next ten days. This week Cooxupe, Brazil’s largest coffee co-operative, said its farmers had harvested 47.3% of their 2026 crop as of July 17 versus 59% a year earlier. In their biannual update, USDA projected 2026/27 global coffee bean production at an all-time high of 189.7 million bags, up from 178.8 million in 2025/26.

COCOA

September Cocoa was near unchanged early Friday and was inside Thursday’s range for the most part. The selloff from the July 9 high to Thursday’s low was almost to the 0.382 retracement of that rally, and perhaps the market will chop around until El Nino’s effect on this year’s rainfall potential is better known. Mid-crop production out of West Africa has been strong, with cumulative port arrivals in Ivory Coast reaching their highest levels since 2023. The trade is expecting the global surplus to narrow in 2026/27 based on El Nino’s tendency to bring dry conditions to key growing areas in west Africa and southeast Asia. World Weather Inc. expects rain to be erratic and light at times from Ivory Coast to Cameroon and Nigeria during the next week, but showers and thunderstorms will develop in parts of the region each day.  All areas will receive at least some rain that will be beneficial with light to moderate rain resulting most days. Seasonal rains normally return in August and September, which is when El Nino’s effects could be noticed.

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