Brazil Government Supports Coffee Exporters

COFFEE

December Coffee received some support from a report of frost this week, even though most reports have the affected area being very limited and the potential for significant damage being very low. Another supportive factor has been the consistent declines in ICE certified stocks, which fell another 9,750 bags yesterday to 726,661, their lowest since May 13, 2024. Reuters reports that the Brazilian government unveiled an aid package this week for companies hurt by the US-imposed 50% tariffs on Brazilian goods. The package includes credit lines for exporters and government purchases of products that may have trouble finding alternative markets. As the futures are an international contract with delivery locations in Europe as well as the US, the tariffs are expected to affect basis levels and price differentials between various origins but not necessarily push the futures in one direction or another. Brazilian coffee shipped to the US would have to trade at a discount to futures to offset the tariff, and Brazilian coffee headed for the EU or Asia would trade at a premium due to Brazilian government buying. The measures are part of an executive order signed by the Brazilian president and takes effect immediately, but it must be approved by Congress within four months to remain in force. Brazil’s new aid program also eases the tax burden on exporters to help them remain competitive in the US, but it could cost the government 5 billion reais in foregone revenue. World Weather Service says Brazil faces no risk of crop threatening cold for at least another week.

SUGAR

October Sugar extended this week’s selloff overnight and fell to its lowest level since August 11. The UNICA report on Brazilian Center-South production for the second half of July will be released today, and from the market’s direction overnight, it appears that traders are expecting a bearish number. The last report showed first-half July production was up 15% from a year ago and that cumulative production was down 9.2%. The dry conditions in Brazil were supportive to cane harvest and production in the first half of July, and those conditions extended into the second half of the month as well. Production usually peaks for the year in the second half of July. First-half July production was 3.406 million metric tons, up from 2.906 million last year. Last year’s second-half July production was 3.643 million tons. Sugar’s share of cane crush was 53.68% in the first half of July versus 49.89% a year ago. European traders told Reuters yesterday that Pakistan’s state trading agency TCP did end up buying another 50,000 metric tons of white sugar, bringing the total purchases this week to 105,000. Pakistan’s government has approved plans to import 500,000 tons to help to maintain price stability after retail prices rose sharply. World Weather Service says flood potentials in Central India are expected to run high in the coming week as a monsoon low pressure center moves across the region. This includes eastern Maharashtra, which is a major cane area.

COTTON

December Cotton saw a brief rally yesterday after the weekly export sales report came in stronger than expected, but it resumed its downtrend overnight. The export report showed US cotton sales for the week ending August 7 at 241,982 bales for the 2025/26 (current) marketing year and 1,056 for 2026/27 for a total of 243,038. This was up from 92,128 the previous week and the highest since June 12. The sales pace this year has been very sluggish, and the strong report this week was appreciated. It just needs to continue. The dollar is lower again today after a rally yesterday in the wake of a hotter than expected PPI report that cast shade on the potential for an aggress rate cut. US crop conditions have slipped the past couple of weeks, but they remain ahead of normal. World Weather Service expected limited rainfall in West Texas over the next 10-14 days. The dryland crop needs moisture, especially in the southwest. The US Delta is drying down, and timely rain is needed, and they may not see much rain until mid- to late next week. The southeastern US has received significant rain recently, and more is expected. The USDA report this week showed the US stocks/use ratio was below the five year average for the first time this year, which at least puts the market in a bullish posture after falling to five-year lows in March.

COCOA

This week, Ivory Coast’s regulator, the CCC, cut its forward export contract sales for the 2025/26 main crop to 1.2 million metric tons from 1.3 million previously. This move was intended to protect against possible contract defaults, and it injected some doubt about the upcoming crop. In their last quarterly update, the International Cocoa Organization (ICCO) had Ivory Coast’s 2024/25 production at 1.850 million tons, up from 1.675 million in 2023/24 but still down from 2.241 million in 2022/23. The 2025/26 crop year begins on October 1. World Weather Service expects rains in Ivory Coast and Ghana to stay on the light side through the next week with a shift to a wetter pattern in the latter part of August and early September. None of this is unusual for this time of year. ICE exchange stocks fell 8,669 bags yesterday to 2.235 million, the lowest since June 5. Stocks have declined in 15 out of the last 17 sessions and are down 133,264 bags since July 22. However, the amount pending grading increased another 69,235 bags yesterday to 200,603, which is the highest going back at least 13 months.

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