Coffee Extends Four-Day Rally

COFFEE

March Coffee was higher for the fourth straight session early Tuesday following last week’s failed attempt to take out the December low. The market is in a consolidation mode, with Brazil’s upcoming crop looking good but enough uncertainty over global supply to defer a selloff. Sucden recently forecasted Brazil’s 2026/27 arabica production at 47.5 million bags, up from 39 million in 2025/26, with robusta output expected to be unchanged at 25 million. Harvest begins in April or May, and producers stress there is still a lot of the growing season left. Brazilian coffee agronomist Jonas Ferraresso told Reuters that some producers are reporting that the sprouting of pruned coffee plants is not very good, which he suggests is probably related to the uneven distribution of rainfall this month. He expects production this year to be in line with last year’s output or slightly higher, which does not sound as optimistic as other forecasts. Another source, Luiz Carlos Bastianello, president of Cooabriel, told Reuters that Brazil’s conilon (robusta) output could be lower this year. Like arabica plants, conilon follows a biennial pattern and experiences off years. World Weather, Inc. said Brazil’s rain last week and over the weekend was frequent and sometimes heavy. They maintain that the abundance of precipitation recently has been quite supportive of cherry development and temperatures have been close to normal and that these tendencies are expected to prevail into early February.

COCOA

March Cocoa was mixed early Tuesday but managed to avoid a test of Friday’s contract low for the second straight session. Crop conditions in West Africa continue to sound favorable, but after a 35% prices decline in two weeks, the trade is reluctant press the market lower, and conditions are turning drier. Ivory Coast farmers interviewed by Reuters said on Monday that below-average rains in most of Ivory Coast’s key cocoa regions last week are expected to support the development of the April-September mid-crop. The region is in its dry season which runs officially from mid-November to March. They added that February would be a critical month for determining the length and size of the mid-crop and that consistent weekly rainfall during the month would ensure a healthy harvest starting in May. World Weather, Inc. says notes that the Harmattan wind was becoming a little more consistent. Not much rain is expected during the early to middle part of this week. A few showers may impact coastal areas while key cocoa areas are left dry. Some showers may increase near the coast during the second half of this week and continue into early next week, but activity will be sporadic and mostly light leaving the region in a net drying mode, which is normal for this time of year

COTTON

March Cotton was higher early Tuesday but inside Monday’s big range down. Cotton demand still seems to be lacking, as the market traded to new contract lows on Monday despite two weeks of strong export sales and the US dollar falling to its lowest level since September this week. The lower dollar makes US more competitive on the global market, but buyers may be standing back if they think the dollar could fall even more. As noted last Friday, the export sales report showed net sales of 438,392 bales for the week ending January 15, up from 349,844 the previous week and the highest for the marketing year so far. It was only the fourth time this year sales were above 300,000 bales in a given week. However, current year sales are far enough behind that it may take several more weeks of strong numbers to change traders’ outlooks. Cumulative sales for 2025/26 have reached just 7.350 million bales, down from 8.068 million at this time last year and the lowest in 11 years. Sales have reached 66% of the USDA forecast versus a five-year average of 80% for this point in the marketing year, which suggests the USDA could lower its forecast for 2025/26 in upcoming reports. The winter storm this week did appear to bring some much needed moisture to the Texas and the northern Delta. As of January 6, an area representing about 80% of US cotton production was experiencing drought.

SUGAR

March Sugar was higher early Tuesday but still inside the narrow range of the past two weeks. World Weather Inc. said on Monday that sugarcane conditions in Brazil will remain good for much of the next two weeks, although some drying is likely that may require some timely rain in February. Brazilian state-run oil company Petrobras will reduce the average price of gasoline sold to distributors by 5.2%, starting January 27. This could discourage cane crushing for ethanol, but it is late enough in the season to not make much of a material difference in Brazil’s output. Their new season officially starts in April.  The sugar market appears to be attempting to build a base after a 50% decline in prices over the course of two years. Thailand and India are coming off a strong year after good monsoon rainfall last summer. The possibility of El Niño arriving this summer could raise concerns about this year’s monsoons and production, but that will depend on the severity and timing of the event. Brazil has been favoring ethanol production over sugar since October. A Brazilian consultancy has noted a reduction in farmer investment in cane production due to low prices. India may have more sugar to sell if prices get high enough. They government has allowed 1.5 million metric tons to be exported, but only a fraction of that has been reported.

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