ADMIS News
COCOA
Cocoa prices rallied 324 points (+8%) from Monday’s 8-week low through midsession Friday, and it extended those gains overnight. Reports that commercial buyers became more aggressive following last week’s pullback provided support. Ivory Coast port arrivals totaled 41,000 tonnes for the week ending January 14, down from 70,000 for the same week last year. This brings the total for the season that began on October 1 to 914,000 tonnes, down 36% from last year. However, the weather in Ivory Coast appears to be cooperating. Rainfall was above average for most of Ivory Coast’s cocoa growing regions for the second straight week, boosting the growth of small pods ahead of the April-September mid-crop. The region is currently in its dry season, which runs from mid-November to March, and it appears that it has so far avoided much damage from the seasonal dry Harmattan winds. There had been lingering concerns that El Nino could bring drier than normal conditions to the region this winter, and so far, that does not appear to be happening. Fourth quarter grindings data from Europe and North America will be released on Thursday, and traders could grow cautious as we move through the week. The last three marketing years produced the three highest global grindings totals on record, with top cocoa processor Ivory Coast seeing a 25% increase over that timeframe.
COTTON
The cotton market saw a brief rally on bullish US numbers in Friday’s USDA monthly supply/demand report but quickly gave up those gains when the world number came in bearish. A revision lower for 2023/24 global consumption was particularly concerning to the bulls, as the US exports face stiff competition from Brazil and Australia, and it seems that only a boost in global demand will lift the market out of its 2 1/2 month trading range. In the report, US 2023/24 cotton production came in at 12.43 million bales versus 12.77 million expected and 12.78 million in the December update. Ending stocks came in at 2.90 million versus 3.11 million and 3.10 million in December. World ending stocks came in at 84.38 million bales versus 82.41 million expected (range 81.90-83.00) and 82.40 million in December. The US numbers were bullish, with both production and ending stocks coming in below average expectations and near or below the low end of the expected range.
COFFEE
The coffee market seems torn between large Arabica supply and tight Robusta supplies and shipping disruptions through the Red Sea. London Robusta prices reached a new 16-year high on Friday and extended the rally overnight. A Houthi anti-ship ballistic missile struck a US-owned and operated cargo ship on Monday. Container freight rates have increased 150% due in the wake of the Houthi attacks on ships in the Red Sea, and this is driving costs higher for European roasters, particularly for Robusta beans coming Vietnam and Indonesia. The attacks have roasters seeking substitute beans from Brazil and Uganda, which lends support to Arabica prices as well. There are also reports of growers in Vietnam hoarding their (Robusta) beans, as their 2023/24 harvest draws to a close. Output is forecast at around 1.66 million tonnes, based on a survey by Bloomberg. This would be around 7% lower than last year. However, many of the world’s largest Arabica-growing nations looking at larger production this season, which could limit gains in the NY futures.
SUGAR
March sugar is in a corrective mode following its steep selloff from the November high to the late December low. The Brazilian harvest has been extended into this year due in part to drier than normal weather, but it is expected to wind down by the end of the month. The extended harvest leaves less carryover cane to be crushed in the 2024/25 season, which starts in April. Brazil’s 2023/24 Center-South sugar production remains well ahead of last season’s pace, but last week’s Unica supply report showed sugar’s share of crushing falling to 37% during the second half of December, which was far below the 47% share it held during the same period last year. This suggests improving Brazilian ethanol demand. Despite the strong Brazilian production this year, the sugar market is faced with low global stocks and poor crops in Asia. Egypt’s state grains buyer GASC struck a deal to buy 100,000 tonnes of imported raw sugar. India has put a 50% duty on Molasses exports derived from the extraction or refining of sugar. India is trying to maintain adequate sugar supply for domestic consumption while also supporting ethanol production by promoting the use of molasses for that purpose.
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