A Boost for Coffee Prices
Coffee’s abrupt change of fortune has lifted prices 9 cents above Wednesday’s 1 1/2 month low and on-track for a positive weekly reversal. While the market has an uncertain Brazilian supply outlook for next season, an improvement in the near-term demand outlook should help coffee maintain upside momentum. Concern that near-term Brazilian supply will remain tight until their upcoming harvest reaches full speed provided a boost to coffee prices. The 2023/24 Brazilian Arabica crop is an “off-year” in their biannual cycle which normally results in a sizable production decline from the previous season. Given this season’s poor production for an “on-year” crop, however, there is a good chance that the 2023/24 Arabica crop will see a production increase. A rebound in the Brazilian currency gave the coffee market a source of carryover support as that will ease pressure on farmers to market their remaining 2022/23 coffee supplies.
While cocoa’s near-term demand concerns are far from being resolved, it only took some relief from risk anxiety to turn the market quickly to the upside. If global risk sentiment can continue to mend, cocoa has a good chance of finishing today’s trading with a positive weekly reversal. The “risk on” mood found in many global markets was particularly beneficial for to cocoa prices, as that should give a significant demand boost for discretionary items such as chocolates. West African growing areas are shifting away from their dry season that normally ends during mid-March, as there is daily rainfall in the forecast through next weekend in many regions. This will have a positive impact on the region’s mid-crop production, but many of those beans will not reach export terminals until mid-April at the earliest. Until then, tight near-term West African supplies will be a supportive factor for cocoa prices.
The higher close for May cotton after trading down to the lowest level since November 28 is a positive technical development. The market broke hard in the wake of the weekly export sales report which showed an improvement from last week, but perhaps not good enough. The dollar and crude oil were up slightly, and the stock market was significantly higher, and this action may have lifted cotton off of its lows. The export report showed US cotton export sales for the week ending March 9 at 225,535 bales for the 2022/23 (current) marketing year and 12,760 for 2023/24 for a total of 238,295. Cumulative sales for 2022/23 have reached 10.869 million bales, down from 13.656 million a year ago and the lowest for this point in the marketing year since 2015/16. Sales have reached 97% of the USDA forecast for the marketing year versus a five-year average of 95%. The largest buyer this week was Vietnam at 120,242 bales, followed by China at 35,832.
Sugar prices were able to find their footing after back-to-back negative daily results, but remain on-track for their first negative weekly result in 3 weeks. A rebound in key outside markets has helped, but sugar prices have to overcome bearish Brazilian supply news to extend its 2023 rally. A significant recovery move in crude oil and RBOB gasoline provided sugar with carryover support as that will help to improve near-term ethanol demand in Brazil and India. Indications that India, China and the EU will all have lower sugar production this season also strengthened sugar prices. There are concerns that Brazil’s Center-South sugar production over the next month will be obstructed from reaching their nation’s port facilities by logistical issues. With unharvested cane from this season adding onto the 2023/24 season’s early harvested cane crop, many Center-South mills are going to start their crushing operations earlier than normal. Crude oil and RBOB gasoline prices still remain close to their recent lows, and will need to reach much higher price levels in order for Center-South mills to shift a significant part of their crushing from sugar to ethanol.
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