El Nino Risks Lift Cocoa

COCOA

December Cocoa was higher early Wednesday following a lower close on Tuesday as the market continued to chop back and forth inside the range established in July. The prospect that El Nino could disrupt West African production in the upcoming marketing year is providing underlying support. Rains typically return in late August/early September, and traders will be interested in seeing if that is delayed this year. World Weather Inc. says some computer forecast models have been suggesting greater rain will impact production areas during the next two weeks as the Inter-Tropical Convergence Zone (ITCZ) starts to drift back to the south. ICE warehouse stocks increased by 9,923 bags on Tuesday to 3.350 million, their highest since August 10.

SUGAR

October Sugar reached its highest level since May 14, 2025 early Wednesday, following a sharp rally Tuesday off reports of low production out of Brazil. Brazil’s Agriculture Ministry estimated Center-South sugar production at 3 million metric tons in the second half of July, which was down 17% from the same period last year. Cumulative production since the marketing year began in April is down 12.4% to 16.9 million tons. The decline in production during July contradicted expectations that the drier conditions during July would have boosted sugar output. The market is still awaiting an update from UNICA. El Nino is threatening to lower production in key cane growing regions. India saw a below normal monsoon this summer and has already suspended exports and is considering allowing duty free imports. Thailand is the second or third largest exporter, and their crop could be threatened by dry conditions brought on by El Nino. The European beet crop has suffered severe damage from extreme heat and drought this summer. The recent Commitments of Traders report showed managed money traders moved to a net long for the first time since May 2025 last week. If the funds become active, it could be a juggernaut, especially if drought concerns expand.

COFFEE

December Coffee was higher early Wednesday and was approaching July’s six-month high. The market is being supported by tight near term supplies as it anticipates the arrival of the Brazilian harvest that was delayed (and possibly damaged) by heavy rains in June. ICE certified arabica fell 2,126 bags on Tuesday to 229,214, their lowest since December 4, 2023. World Weather Inc. says seasonably dry-biased conditions will prevail in Brazilian arabica growing areas through the next week or so, which should help harvest proceed. Safras & Mercado reported last week that Brazil had completed 86% of expected arabica production versus 95% at this point last year. Colombian exports have been slowed in the wake of a recent earthquake that affected a key port. As of Monday, local officials were estimating that it could take two weeks for the port to return to normal.

COTTON

December Cotton was higher for the fourth straight session on Wednesday as the market continued to draw support from concerns about the heat and lack of rain in key US growing areas. World Weather Inc. says dryland crops in West Texas have been deteriorating recently and that the trend will continue for the next ten days. The Delta is also unlikely to see much rain leading to some increase in crop moisture stress. Some relief from the worst conditions is expected late this week and into the weekend in the Delta, but Texas cropland will continue quite stressed by the heat and dryness. The weekly Crop Progress report released on Monday showed 38% of the US cotton crop was rated good/excellent as of August 16, down from 40% the previous week and a five-year average for this date of 47%. Texas was 21% G/E, down from 24% last week, and a five-year average of 34%. Conditions have decline fore three strait weeks for the US and Texas.

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