Cocoa Demand Worries Emerge

COCOA

July Cocoa was lower again overnight and approaching its four-month lows from March. Demand worries have emerged in the wake of the tariff announcements, and this has been enough to offset reduced expectations for Ivory Coast’s mid-crop. Ivory Coast farmers interviewed by Reuters yesterday said they expected significant volumes of beans starting in early May, but they also expressed concern that the weather they have experienced to this point would not produce a good-quality crop. Their rainy season usually runs from April to mid-November. World Weather Service said an erratic rainfall pattern is expected from Ivory Coast to Cameroon and Nigeria during the next week to ten days. Most crop areas will get rain eventually, but much of it will be on the light side. Ivory Coast and areas from southern Nigeria into western Cameroon will be wettest. Some heavy rain may impact southern Cameroon. First-quarter grind numbers for Europe, Asia, and North America are scheduled to be released on April 17. In the fourth quarter, Europe’s grind was -5.4% from the previous year, Asia’s was -0.5%, and North America’s -1.2% in the wake of a rally to new all-time highs. ICE certified stocks increased 6,948 bags yesterday to 1.856 million. Stocks are up 22,822 bags over the past five sessions.

COFFEE

July Coffee was higher overnight following a sharp, two-day selloff in the wake of last week’s tariff announcements. Vietnam was hit with a 46% tariff, and they are the third-largest provider of coffee to the US. Brazil was hit with a 20% tariff. Fears of sharply lower demand have helped pressure the market, but it was already showing signs of exhaustion following a rally to all time highs in February. The Brazilian real was down sharply for the second straight session, which increases the incentive for selling into the export market. Data released yesterday from Colombia’s National Coffee Federation said Colombia produced around 1.06 million bags of washed arabica coffee in March, up from 866,000 in March 2024 (+23%). The 12-month total was 14.992 million bags as of March, up from 11.441 million at this point last year (+31%). Brazil saw some decent rain coverage over the weekend that offered a chance for an improvement in crop conditions and soil moisture, but World Weather Service thinks this will be only temporary, as shower and thunderstorm activity is expected to be sporadic for this week and early next. Some rain is better than none, but more is needed. ICE certified stocks increased by 2,772 bags yesterday to 773,786. Stock levels have been chopping around. On Friday they were down 11,099.

COTTON

May Cotton saw a sharp turnaround yesterday after two days of panic selling stemming in the wake of the tariff announcements. One factor that troubled cotton traders was that Vietnam was hit with one of the largest tariffs (46%), and they are the biggest buyers of US cotton this year. Report that Trump and Vietnam’s leader To Lam (General Secretary of the Communist Party) agreed on Friday to discuss a deal to remove the tariffs offered some relief. Vietnam had already cut several duties and had pledged to buy more American goods, such as planes and agriculture products, before the tariffs were announced. The large net short held by funds as of last week left the market vulnerable to short covering. The first weekly Crop Progress report of the season released yesterday afternoon showed 4% of the US cotton crop was planted as of April 6 versus 5% last year and a 10-year average of 5%. Texas was 6% planted versus 8% last year and 9% on average. Plantings in Texas may have gotten off to a slow start because of very dry conditions that had existed in south Texas earlier in the year. That area saw heavy rains a couple of weeks ago. Much of west Texas is experiencing drought, which could delay plantings there. The Delta saw heavy rains and flooding, which could delay plantings as well. The only states to report any plantings this week were Texas and Arizona.

SUGAR

May Sugar is near unchanged this morning after testing yesterday’s low overnight. In retrospect, this market has performed relatively well in the face of heavy selling in the equity and energy markets after last week’s tariff announcements. Sugar did fall below the 50 and 100-day moving averages overnight, but it avoided a collapse.  Crude oil prices were higher overnight, which probably offered some support. The market also held up despite the Brazilian real falling to its lowest level in a month yesterday, which also suggests some underlying strength. Dry conditions in Brazil and recent mixed messages from India regarding the condition of their crop helped support rallies to the 20-cent level twice this year, but the market has backed off from that level both times, as the crop situation in Brazil is still up in the air.

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