Cocoa Breaks Lower as Supply Builds

COCOA

March Cocoa gapped lower early Tuesday, breaking below a four-month consolidation and finding support at the 200-day moving average. The buildup in exchange stocks over the past several months suggests that supply is outstripping demand. This is also occurring in the face of an El Nino threat that has been hovering over the market for months. On Monday, Ivory Coast cocoa arrivals were estimated at 55,000 metric tons for the week ending November 8, up from 51,000 the previous week. This was the highest so far for the marketing year that began in September but was down from 107,000 for the same week a year ago. Cumulative arrivals for the marketing year have reached 264,500 tons, down from 411,000 a year ago and below the fiver-year average for this point in the season at 434,200, even though the marketing year began one month early this year. Ivory coast farmers interviewed by Reuters said more showers would be needed in coming weeks to improve the size of the September-to-February main crop vulnerable to hot weather. The rainy season typically ends in mid-November. World Weather Inc. said an erratic distribution of showers and thunderstorms will continue through the next week to ten days from Ivory Coast to Cameroon and Nigeria with poor daily coverage that will result in drying conditions.

COFFEE

March Coffee edged lower early Tuesday, but it avoided a test of the September low at 262.60. The increases in ICE certified arabica stocks have extended to three sessions in a row for the first time since September. Stocks increased by 8,947 bags on Monday to 241,403, the highest since October 14; they have increased 21,024 bags in the past three sessions. Stocks have remained stubbornly low, and the recent increase may offer evidence that buyers have replenished supply and are starting to backing off. The Brazilian real remains weak, which encourages producers, roasters and exporters to sell. The currency remains inside the wide range down from the day it collapsed in the wake of the recent election, but it has been drifting lower rather than higher. Recent news that Brazil exported a record 4.8 million bags of green coffee in October, up 23% from October 2025 adds further evidence that exporters are active. World Weather Inc. says rain will impact all Brazilian coffee production areas during the next week to ten days. Precipitation will be light and somewhat erratic through Sunday but may begin to increase early next week. In general, conditions have been supported for the 2027 crops.

COTTON

After reaching its highest level in two weeks on Monday, March Cotton was lower overnight as traders grew cautious ahead of the USDA supply/demand (WASDE) update today. The weekly Crop Progress released Monday afternoon report showed 71% of the US cotton crop had been harvested as of November 8, up from 63% the previous week and ahead of the five-year average for this date is 63%. Texas was 65% harvested, up from 61% last week and above the five-year average at 52%. The report also showed 94% of the crop had bolls open, up from 92% the previous week but below the five year average of 98%. For the WASDE report today, a Bloomberg survey has an average expectation for US 2026/27 cotton production at 13.16 million bales, with a range of estimates of 12.65-13.60 million. This would be down 0.28 million from the October update. US exports are estimated around 12.27 million bales (range 11.95-12.40) versus 12.30 million last month, and ending stocks at 3.62 million bales (range 3.00-4.15 million) versus 3.80 million last month and 3.60 million in the September update. This would also be the lowest ending stocks figure since 2016/17.

SUGAR

March Sugar was lower early Tuesday and slipped below the 18-cent level for the first time since August. The lower trend in energy prices this week undermines sugar on ideas it reduces the incentive to crush cane for ethanol. On the other hand, Brazil’s sugar production this year is down sharply due to too much rain over the past several months, which has extended into October and may bring an early end to the harvest. In their recent update, the USDA FAS office in Brazil cut its forecast for Brazil’s 2026/27 sugar production to 40.5 million metric tons from a previous forecast of 42.5 million and from 43.295 million for 2025/26. Exports were lowered to 27.6 million tons from 29.5 million previously and 29.939 million in 2025/26. Above-average rain in Brazil’s center-south region in September and October slowed crushing and reduced sugar content. These numbers are not a surprise given the reports from the Brazilian ag ministry, but they do reinforce the idea that Brazil’s output has been damaged this year. The USDA said mills may extend crushing into December or start the next season early and that some 30 million tons of cane could be carried over into 2027/28.

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