Coffee Faces Fresh Supply Pressure

COFFEE

December Coffee was near unchanged early Friday after falling to its lowest level since June 30 on Thursday. The market has already seen a steep correction from its August 25 high, falling to the 0.618 retracement of the rally from the June low yesterday and overnight. The arrival of the long-awaited 2025/26 Brazilian crop has eased supply concerns, and exchange stocks are starting to climb off 27-year lows. ICE Certified arabica stocks were up 14,408 bags on Thursday to 247,887, their highest since August 6. Stocks have increased by 30,241 bags in just two days. News that Brazil’s green coffee exports in the first two weeks of September were up 51.5% from the average for September 2025 has pressure this week. Recent rainfall in key Brazilian areas appear to have gotten 2027/28 flowering off to strong start, World Weather Inc. expects a more erratic pattern over the next week to ten days which may lead to some areas of net drying. Coffee development will advance well because of recent rains, but more will be needed again in early October.  A boost in rain is expected in western Nicaragua, Guatemala, and Honduras and coffee areas will benefit.  Recent rains in Vietnam are viewed as beneficial for coffee trees there as well. Sucafina told Reuters that Colombian coffee farmers are about to start the harvest of the 2026/27 main crop with expectations for stable output and slightly lower quality.

COCOA

December Cocoa extended its selloff overnight to its lowest level since July 31. The fact that west Africa has seen rainfall return over the past few weeks appears to have eased concerns about the upcoming crop. The rainfall would not be described as “abundant.” World Weather Inc. has reported a mix of dry conditions and light rainfall this week in Ivory Coast and Ghana. They expect rain to fall in most cocoa production during the next week, mostly light to moderate on a daily basis but all of it welcome. Ivory Coast will need more. They add that long term moisture deficits are unlikely to go away, but enough rain will fall to support crop development. El Nino is expected to peak in November and last into February, and in the past it has been known to bring drier than normal conditions to West Africa. Indonesia, not as big a producer as in the past, has already seen very dry conditions this year. There are concerns that supplies are backing up as exporters deal with new reporting requirements to meet the EU’s deforestation regulations.

SUGAR

March Sugar was higher early Friday after falling to its lowest level since August 26 earlier in the session. The market has been under pressure since putting in a contract high on September 10, as the bulls grew concerned over the large net long held by the funds. The Brazil Agriculture Ministry reported on Thursday that center-south sugar production for the second half of August was 3.72 million metric tons, -4.8% in from the same period last year. Cane crushing totaled 52 million tons for the period, +3.5% from a year ago, and ethanol production (cane and corn-based) was 2.55 billion liters, +3.5%. This shows crushing for ethanol remains firm, which is a trend that started about a year ago. The rally in energy prices this year doesn’t hurt. Cumulative center-south sugar production for the 2026/27 marketing year, which began in April, is running around 11% below last year, with crush +2% and ethanol production +14%. At the overnight lows, the market had lost 1.69 cents (-9%) from its high from last Friday, which suggests some moderate selling on the part of the funds, but the market was still up 2.97 cents from the low on August 31. Tuesday’s close was down just 0.79 cents from the high, which suggest that this afternoon’s Commitments of Traders report (which is collected as of Tuesday) will not show a big drop in the fund net long position. Bullish factors include lower beet production in Europe, reduced prospects for Indian output due to an uneven monsoon, and lower production expected out of Thailand.

COTTON

December Cotton extended its selloff early Friday to its lowest level since August 3. Perhaps this is harvest pressure, but another dismal export sales report on Thursday doesn’t help either. The dollar has reached its highest level since July 30, which reduced US export prospects because it makes them appear expensive on the global markets. A setback in crude oil this week may add to pressure on ideas it make polyester less expensive, but oil prices are already very  high. US export sales continue to disappoint. Yesterday’s export sales report showed cotton export sales for the week ending September 10 at 71,231 bales for the 2027/28 (current) marketing year and 6,160 for 2028/29 for a total of 77,391. This was up from 76,318 the previous week, but it was down from 186,100 for the same point last year and below a five-year average of 150,900. Cumulative sales for 2027/28 have reached 4.504 million bales, up from 3.973 million at this time last year but below the five-year average of 5.676 million. Sales have reached 39% of the USDA forecast versus a five-year average of 48% for this point in the marketing year.

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