Coffee Rebounds After Export Shock

COFFEE

December Coffee was higher early Friday and well off Thursday’s low that came after a decline of 55.90 (-16%) from a 10-month high in just eight sessions. The market saw a sharp change in direction last week after a Brazilian exporters association revised August export data from -22.5% from July to +20.5% due to a glitch in software, and  this changed the market’s psychology in one day. World Weather Inc. says showers and thunderstorms will evolve during the weekend in Brazil and slowly expand across coffee production areas next week with the greatest rain in the second half. Sufficient rain may fall from Parana to southern Sul de Minas to induce greater flowering.  The Central Highlands of Vietnam will see regular rain through the next week and favorable conditions for coffee development while coffee in much of Indonesia sees little rain and rising stress. El Nino is expected to will continue to suppress rain in key robusta areas of Indonesia through the next week, with tree stress steadily increasing. The northern half of Sumatra will fare better than other crop areas in Indonesia and will see relatively frequent showers and thunderstorms.  Resulting rainfall will be light to moderate most often. Some arabica areas have been hit by flooding and landside, but while Indonesia is the fourth largest coffee producer in the world, only about 12% of that is arabica coffee. They represent about 12% of the world’s robusta production and about 1% of arabica.

SUGAR

October Sugar was higher early Friday but inside Thursday’s range down action. The selloff on Thursday followed a move to its highest level in more than two years on Wednesday. The selloff may have been driven by funds disappointed that Wednesday’s rally only managed to take out last week’s high by 0.11 cents, and they may have also been spooked by some technical indicators hinting at a loss of momentum. Last week’s Commitments of Traders report showed managed money traders were net long 207,082 contracts, which was their highest since September2023 and left the market vulnerable to heavy selling. In the meantime, the market received some bullish support when the Brazilian agriculture ministry put the nation’s center-south sugar production for the first half of August at 3.31 million metric tons, down 7.9% from a the same period last year. The cane crush was 48.39 million tons, up 2% from a year ago, and ethanol for the period was 2.34 billion liters, up 6% year on year. This includes ethanol derived from can and corn. The International Sugar Organization earlier this week forecast a small global sugar deficit of 200,000 metric tons for 2026/27, which may have been smaller than what the trade was expecting. They expect an increase in Brazil to counter sharp declines in the European Union, Thailand and Central America. World Weather Inc expects rains to increase into Monday in Brazil’s center south region, which could interrupt harvesting again.

COCOA

December Cocoa was higher early Friday following a three day selloff from 11-month highs. Suggestions from the Mondelez chief cocoa officer this week that cocoa supplies are ample enough to endure a drop in production countered some of the worst fears over the possible damage El Nino will incur on output, especially in west Africa. The prior El Nino event caused a severe setback, first due to too much rain in late summer and then extreme heat and drought during the dry season in December-January. Keep in mind no two El Ninos are alike. This event is expected to be one of the severest on record, but that does not necessarily translate to weather extremes. The UN World Meteorological Organization said on Thursday that this event had a near 100% likelihood to persist through February 2027, due to exceptionally warm Pacific Ocean temperatures, suggesting more speculation and worry await. World Weather Inc. noted that rain has returned to some central Ivory Coast coffee areas this week and greater amounts can  be expected next week across much of west Africa, which will be welcome.

COTTON

December Cotton was higher early Friday but inside the bottom half of Thursday’s range down that took the market down 7.64 cents (-8%) in just three sessions. Thursday’s export sales report added bearish news to the slight increase in US crop conditions earlier this week. A burdensome net long held by the funds only added to the selling pressure. Hints on Thursday from Russian President Vladimir Putin said there was a chance of a peace agreement to end the war in Ukraine pressured wheat prices, which may have spilled over into cotton. The export sales report showed net cotton sales for the week ending August 27 at 27,525 bales, all for the 2027/28 (current) marketing year. This was down from 135,326 the previous week and the lowest in two years. However, it is not unusual to see a slow start at the beginning of a marketing year, as harvest has yet to begin in earnest. Cumulative sales for 2027/28 have reached 4.359 million bales, up from 3.657 million at this time last year but below the five-year average of 5.304 million. Sales have reached 37% of the USDA forecast versus a five-year average of 45% for this point in the marketing year. Shipments totaled 189,480 bales, up from 181,025 the previous week. World Weather Inc. says west Texas and Oklahoma will remain hot for another week. There is some potential for showers and thunderstorms near mid-month, but the precipitation will come a little late to be of much use to this year’s crops. The Delta has been too hot and dry recently and change may not occur anytime soon. This suggests that the chances for a dramatic improvement in US crop conditions are slim.

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