Cocoa Crop Risks Rise

COCOA

September Cocoa gapped lower for the second straight session overnight, following a weak close on Friday after a move to its highest level since November 5 on Thursday. At its high on Thursday, the market just managed to close a gap from last November, achieving a technical target that may spell a peak in the market until more is known about the upcoming crop. The current mid-crop appears to be in good shape, but concerns are arising about the 2026/27 main and mid crops due to excess rains and the possibility that El Nino will disrupt the growing season. A Reuters story on Friday, citing four pod counters and five major exporters in Ivory Coast, indicated that the nation’s 2026/27 main crop could drop more than 10% because of excess rains earlier this season. Another group, consultancy Oxford Economics, said initial estimates suggest the nation’s 2026/27 cocoa harvest overall could fall by roughly 20%. The said crop surveys showed more than 20% of flowers and cherelles had died between May and June due to the heavy rainfall. The cooler conditions that accompanied the excess moisture may have also encouraged the spread of black pod disease. Good growing weather January and May helped produce unusually large beans and high bean counts of around 110 beans per 100 grams versus an average of 130-160. This benefits the current mid-crop, but it could also mean the trees are exhausted and set to produce less next season.

COFFEE

September Coffee was near unchanged early Monday as it continues to consolidate following last Monday’s move to its highest level since October. The ICE exchange raising margin requirements last week apparently sparked a major bout of short covering. However, the Commitments of Traders reports show that managed money traders and other spec categories have been holding relatively small, net long positions recently. Commercial traders were net short, but the positions were relatively small compared to where they were in 2024 and 2025. There has also been a growing sense of concern over El Nino, which at this point appears to be having a direct effect on robusta production in southeast Asia, starting with Indonesia buy extending to the world’s larger grower, Vietnam. The US CPC last week saying there was an 81% chance of a very strong El Nino this fall, which would rank among the largest on record, gave ammunition to the rally. Recent drier conditions in Brazil are welcome following some extremely heavy rains in June that slowed the harvest and damaged some of the crop. The market had been expecting a very strong crop this year that would help alleviate tight global supplies of arabica coffee. The interruption in the harvest appears to have made the situation even tighter. World Weather Inc, does not expected much rains in Brazil coffee areas through the next week to ten days, and growing areas will not be threatened by any damaging cold. However, they noted with net drying in Indonesia and erratic and often lighter than usual rains in Vietnam, southern India and the Greater Antilles. Rain has been more frequent in Mexico and Central America. Peru, Colombia, Ecuador and Venezuela rainfall has been a little erratic recently, although most production areas are still receiving moisture frequently enough to maintain crop production forecasts.  Drying will expand and be exacerbated possibly leading to a higher level of tree stress later this year if the forecasts for a very strong or “super” El Nino are correct.

SUGAR

The USDA lowered US 2026/27 sugar production to 9.004 million short tons 9.063 million in the June update, with a 118,000-ton drop in beet sugar production and 57,000-ton increase in cane. That was accompanied by at 300,000-ton increase in imports from Mexico. The increase in imports implies more sugar will be taken more sugar off the global market. The weather outlook it mixed, with Europe having a chance to improve this week, India and Thailand remaining dry, and Brazil dry, which could benefit harvests, and not threatened by cold. World Weather Inc says Europe could see periodic showers and seasonable temperatures, but a big soaking rain is still lacking. Follow up rain will be extremely important. India rainfall will continue limited in the northwest, central and far south for the next full week and possibly ten days. Central India still has favorable soil moisture from previous rain, but southern India is already too dry. Southern Thailand is also seeing below normal rainfall, but water supply for irrigation is still favorable and will carry some of the crops in the region through the drier conditions for a while. Concern will increase if significant rain has not fallen before the end of the rainy season.

COTTON

December Cotton was sharply higher early Monday, reaching its highest level since May 20. The market managed to just close a gap from that day, and traders will be watching to see if achieving that technical target will satisfy the bears or encourage more buyers. The USDA supply/demand report on Friday came in at bearish end of expectations for US 2026/27 production and ending stocks and world ending stocks, but the market quickly recovered after selling off upon the initial release. The USDA surprised by raising average yield, but dry conditions persist in west Texas, which was apparently enough for the bulls to disregard the report. Higher crude oil prices off increased hostilities between the US and Iran may have also lent support

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