Cocoa Supply Buildup

COCOA

March Cocoa was lower early Monday and was close to taking out Friday’s contract lows. The selloff in the precious metals has likely contributed to the negative sentiment in the softs markets in recent sessions, but cocoa was already under pressure from a buildup of unsold beans in Ivory Coast and Ghana. Higher official prices this year have encouraged farmers to harvest beans and bring them to market, but buyers have been reluctant to pay these prices. The regulators setting the price, such as CCC in Ivory Coast, have begun buying beans from the farmers. This is an expensive prospect, especially if they cannot be sold. Adding insult to injury, the fourth quarter grind data released in mid-January showed a big drop from 2024, confirming slow demand.

COFFEE

March Coffee fell to its lowest level since fell below a five-month consolidation on Friday to trade to its lowest level since August 19, and it was hovering in the lower end of Friday’s range early Monday. Traders may be finally convinced that the upcoming Brazilian crop will be strong. Decent rains over the past couple of months, including some active rainfall in January, are setting the trees up for good cherry development. It is also the on-year for Brazil’s biennial cycle. Dealers told Reuters last week that the good weather is encouraging farmers to increase their forward sales as they fear prices will fall further. There is also talks of large amount of Central American arabica beans heading to exchange warehouses.

COTTON

March Cotton fell to new contract lows early Monday, with the pressure on commodities across the board adding insult to injury. Export sales have shown occasional bouts of strength recently, but they have not been consistent enough alter expectations that US supply/demand balance will be burdensome. Cumulative sales have reached 67% of the USDA forecast for 2025/26 versus a five-year average of 82% for this point in the marketing year, which leaves open the possibility of a revision lower in the USDA forecast in upcoming supply/demand reports. The recovery in the dollar off last week’s lows makes US cotton more expensive on the world market, but then again the dollar’s move to a two-year low did not inspire much excitement. The drop crude oil to start the week makes it cheaper to produce polyester, but the move to its highest level since August last week offered little support. World Weather Inc. reports that excessive heat and dryness in Australia has stressed cotton. The heatwave is now over, but significant rain is unlikely for a while and dryland crops will continue to struggle. Texas needs moisture ahead of planting, though some modest improvement was seen in West Texas after the rain/ice/snow storm last week.

SUGAR

March Sugar was lower early Monday after breaking below a two-month consolidation pattern on Friday and fell to its lowest level since November 10. This puts the market in striking distance of the contract low at 14.04 from November 6, which was the lowest the nearby contract had been since October, 2020. The global sugar market is looking at surplus this year, thought recent forecasts have narrowed it somewhat. Reduced demand from the success of weight loss drugs is a recurring theme. Last week, Green Pool projected a global surplus of 156,000 metric tons in 2026/27, smaller than the 2.74 million tons in 2025/26. Reuters said on Friday that there were reports of a strong “end of the crop” in India. The Indian government has allowed its sugar producers to export as much as 1.5 million metric tons this year, and so far the amount of sales reported has been only a small fraction of that. Low prices have encouraged Brazilian processors to focus more of their cane crush on ethanol, but it is a bit late in the season to have much affect on the 2025/26 crop, which officially ends in March.

Interested in more futures markets?  Explore our Market Dashboards here.