Brazil Coffee Outlook Improves

COFFEE

Brazilian weather is improving for the upcoming coffee crop, but the trade is awaiting updates on the Brazilian/US trade negotiations. The Brazilian President was upbeat about the prospects of an agreement after he met with President Trump this week, but President Trump was more guarded in his comments. There was a story yesterday that US coffee roasters are rapidly using up their stockpiles as they await the outcome of the talks and that they could be at “minimal” levels by December. ICE certified stocks were unchanged yesterday at 446,475 bags, still their lowest since March 11, 2024. World Weather Inc. says much improved rainfall is predicted for Brazil coffee areas starting today and lasting through much of next week, which they expect finally start to improve soil moisture for better long term tree and cherry development. The rains are also expected to even out new crop flowering, pollination and cherry setting for the 2026/27 crop.

SUGAR

March Sugar fell to another new contract low yesterday but has managed to hold above that level overnight. Prices have fallen 2.81 cents (-15%) in three weeks, leaving the market vulnerable to a short covering rally on any bullish news. Good weather in key growing regions across the globe and a global surplus expected for the 2025/26 marketing year (October/September) have inspired the selloff. The trade is expecting India to be a net exporter again this year. Indian sugar producers have reportedly asked the government to expand its export allowances to 2 million tons in 2026 from 1 million this year. However, news this week that India’s Uttar Pradesh state has raised the sugarcane price that mills must pay for the new crop by 8.1% suggest that the supply/demand balance might be tighter than expected, or at least a potential roadblock to expanded exports. Yesterday’s UNICA report was slightly bearish, with Brazil Center-South sugar production for the first half of October at 34.037 metric tons versus an average expectation of 33.42 million from a survey of analysts by S&P Global. Sugar production for the period came in at 2.84 million tons, also above the 2.47 million expected. One supportive factor was sugar’s share of the crush, which fell to 48.2% this period from 51.2% the previous period and the first time it has been below 50% since the second half April. Cumulative sugar production for their 2025/26 marketing year (April-March) is now +0.89% ahead of a year ago versus +0.87% at the end of September.

COCOA

December Cocoa is higher this morning as traders are not quite sure about the main crop harvest in West Africa. Ivory Coast arrivals have started out on the slow side, which could be the result of an extended dry period towards the end of the summer. Recent rain/dry spells have been good for the crop. Cumulative arrivals as of Sunday had reached 214,000 metric tons, down from 285,000 a year ago and the five-year average of 298,000. Growers have been upbeat about the crop’s prospects, but consultancy TRS said this week that Ivory Coast and Ghana could see a “poor tail” to their main crop that could be offset by a good mid-crop. World Weather Inc. says periodic rain will continue to fall from southern Ivory Coast through southern Ghana and Nigeria to Cameroon. The precipitation will all be welcome and so will be the net drying that occurs in northern production areas which is normal for this time of year. A representative from Hershey said yesterday that its performance for Halloween has been “disappointing.” Meanwhile, Mondelez International Inc., reduced its full-year outlook amid elevated cocoa costs and a pullback in consumer spending. ICE stocks fell 7,862 bags yesterday to 1.820 million, the lowest since March 28.

COTTON

December cotton is was slightly lower overnight but it held inside the lower end yesterday’s wide range. The rally this week on hopes of a trade deal with China gave way to reality when the framework of the deal did not mention cotton. China has bought very little cotton from the US so far this year, with the last export sales report prior to the government shutdown showing their cumulative purchases at 69,539 bales versus 461,850 for the same period last year and 1.625 million the year before that. China’s crop appears to be in decent shape given the weather reports this year, and this may limit their import needs. In recent years China has switched to Brazilian cotton. Vietnam has become the biggest buyer of US cotton, and prior to the shutdown their commitments had reached 975,125 tons, up from 531,628 a year prior and the highest since 2020/21. Heavy rains in India are expected to cause problems in cotton quality but not necessarily the size of the crop, which could improve US export prospects. Hard frosts and freezes in West Texas have likely ended the growing season. It doesn’t appear that there was much damage. Texas’ crop conditions were strong as of the last report prior to the government shutdown, and the weather since has not raised any alarms.

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