Cocoa Supported By Dry Trend in W Africa

COCOA

December Cocoa was lower overnight, after trading its highest level in two weeks yesterday. The market may have drawn support this week from a dry trend in West Africa, but the outlook for the upcoming main crop is mostly positive, as a mixture of rain and sunshine this summer is good for pod development and for avoiding black pod disease. World Weather Service says cocoa areas from eastern Ivory Coast, parts of Ghana and southwestern Nigeria have reported below to well below normal rainfall in the past 30 days, with the driest conditions occurring in the most recent ten days to two weeks. However, they expect seasonal rains to return in late August and especially September, which should be provide adequate relief. This week, a Reuters poll of analysts predicted a record global supply deficit of 475,000 tons for 2023/24, up from a previous forecast of 375,000 in February. (In their second-quarter update, ICCO put the 2023/24 deficit at 439,000 tons.) However, the survey also projected a surplus of 108,500 tons for 2024/25.

COFFEE

September Coffee is near unchanged this morning following a two-day rally that has taken the market within striking distance of last month’s contract high. Brazil’s state weather forecaster CPTEC released an alert for possible frosts over the weekend, but they are not expected to hit the main coffee areas. World Weather Service agrees with that forecast, as it expects a couple of cool fronts moving through Brazil coffee areas late this week into early next week that will bring down temperatures but says threatening cold in key coffee areas is not very likely. Some of the highest elevated areas not far from coffee country may see temperatures low enough for a little soft frost, but the potential for damaging cold in coffee areas is very low. Seasonably dry conditions are expected to dominate Brazil’s coffee production region over the next week to ten days. This has reduced the quality of the current crop and raised concerns about the upcoming crops.

COTTON

December Cotton is lower this morning and is close to yesterday’s contract lows. US equity markets are on edge this morning following yesterday’s setback, and this could be putting cotton traders on edge as well. US crop conditions have slipped the past couple of weeks,  mostly because of Texas. Texas and the Delta could see some exposure to hot and dry conditions over the next couple of weeks, but there is apparently not enough of a threat to get buyers interested. The NWS 1-5 day forecast has some rain reaching west Texas. The 6-10 and 8-14 day forecasts call for above or much above normal temperatures across Texas and the Delta with mostly normal chances of rain in west Texas and near normal or below normal in the Delta. World Weather Service said that dryland production areas in Texas will experience a cut in production without significant rain soon and that US Delta crop conditions are rated well and have improved with recent dry and warm weather.  Recent flooding from Hurricane Debby appear to have had limited impact on growing areas, but the storm hit landfall for the second time overnight, and it could bring heavy rains to eastern North Carolina.

The weekly US export sales report comes out this morning. Last week’s report showed net cancellations of 1.086 million bales of old crop and net sales of 1.358 million of new crop, for an overall net sale of 270,000.

SUGAR

October Sugar was higher overnight on apparent short covering after the market fell to its lowest level in almost two years on Monday (basis the nearby contracts). The Brazilian real has bounced off of 2 ½ year lows this week, and this may have reduced the pressure on Brazilian producers to sell into the export market. The UNICA report on sugar production for the second half of July is expected to be released this week or next. The previous report showed first-half July Center South sugar production at 2.939 million tons, down 9.7% from last year and down from 3.247 million in the second half of June. The fact that they had declined from the previous period was a bit of a surprise. Cumulative production since the marketing year began was running 10% higher than last year. A survey by S&P Global Commodity Insights had a median forecast for sugar production in the second half of July at 3.6 million tons, which would be down 2.4% from a year ago but up from the first half. Thailand is expected to see drier than normal conditions over the next 10 days, and Brazil is expected to be seasonably dry.

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