Cocoa Edged Below 3Wk Consolidation Range

COCOA

December Cocoa edged below a three-week consolidation range yesterday and traded to its lowest level since July 9. Weather in west Africa has been on the dry side recently, but that has been greeted as generally positive for the upcoming main crop, as periods of sun and rain are good for pod development and for avoiding disease. World Weather Service reports that July rainfall trended near to below normal in the main cocoa production areas. The region has adequate moisture to support most crops, but net drying has been accelerated in the past two weeks from Ivory Coast to Nigeria and Cameroon as seasonal rains have shifted to the north. As long as periodic rain occurs in the next few weeks before seasonal rain returns, there should be no significant production changes. Drier-than-normal weather is expected for at least the next seven days, and the need for rain will increase later this month. Hershey cut its profit and sales forecast yesterday, as high prices appear to be eating into consumer sales.

COFFEE

The downtrend off the July 11 contract high continues, with September NY Coffee trading to its lowest level since July 23 yesterday. Harvest pressure from Brazil seems to be the culprit. The harvest is reportedly more than 80% complete. ICE arabica stocks increased by 7,895 bags yesterday to 822,8194, which was the highest since July 2.  Brazil-origin stocks increased by 6,300 bags to 413,221. Key coffee growing areas in Brazil continue to miss out on rains. For weeks traders have been expressing concern about small bean sizes for the current crop, and this week the largest coffee co-op in Brazil warned that the 2025 crop (and tree health) could suffer if conditions do not change soon. It has been more than 120 days since the key growing areas in Minas Gerais have received any measurable rain. Vietnamese exported 964,000 metric tons of coffee from January through July, down 13.8% from the same period last  year. Indonesia exported 7,252.1 tons of Sumatra robusta beans in June, down 51.9% from the same period last year, but this week dealers reported some price pressure as growers are offering more beans. Beneficial, but mostly light, rain fell on a large part of the Central Highlands of Vietnam on Wednesday.

COTTON

December Cotton reversed lower yesterday and fell back near the vicinity of the contract low from July 24, as a steep selloff in US equities and a less than supportive export sales report pressured the market. The US jobs report this morning could be the biggest driver today, as a poor result could pressure the equity prices even further, with the worry being that the Fed waited too long to cut rates. US cotton exports sales for the week ending July 25 showed cancellations of 1,085,807 bales for the 2023/24 (current) marketing year and sales of 1,355,738 for 2024/25 for an overall net sale of 269,911 for the two crops combined. This was the biggest cancellation of current-crop sales going back to at least 1998. (The second largest was 602,143 from June 2012.) Cumulative new crop sales have reached 4.071 million bales, versus 2.510 million this time last year and a five-year average of 3.817 million, but traders did not greet this as bullish, as about 25% of the sales have come from the rolling forward of old crop commitments this week. Vietnam was the largest buyer overall, with cancellations of 126,078 bales of current crop and purchases of 215,175 new crop for a net of +89,089. They were followed by China, which canceled 597,320 of current crop and bought 650,052 of new crop for a net of +52,732. Pakistan canceled 369,059 of old crop and bought 419,786 of new for a net of +50,727. The weekly US drought monitor showed 11% of US cotton production was within an area experiencing drought as of July 30, up from 10% the previous week but down from 16% two weeks ago and 20% a year ago. Drought conditions have lessened over the past two weeks, especially in the southeast but also in the Delta and west Texas. The 6-10 and day forecast has much above normal temperatures in west Texas with near normal rainfall, that could cause some net moisture loss. Less extreme heat and above normal chances of rain show up in the 8-14-day.

SUGAR

October Sugar has rejected bullish concerns about Brazil weather this week and has embraced a more optimistic forecast for India and Thailand. Some dealers think that the Indian crop will be strong enough to allow exports in 2024/25. Their July rainfall was 9% above the long-term average. Southern areas saw above average rainfall, but northern regions received less than normal amounts. The northeast includes the key production area of Uttar Pradesh, but the west and south also include some major areas, so the rainfall reports are a bit mixed. The arrival of La Niña in late August could bring above average rainfall in September. August rain could be average to below average according to the India Meteorological Department. , The key producing state of Maharashtra could see below average rain in August. Dry conditions in Brail could support the market at the July lows. Center South production showed a decline in the first half of July, and news of that sparked a the rally off the July 24 low. The recent negative sentiment towards the US economy adds pressure to the market.

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