Coffee Sees Choppy 2-Sided Trade
March coffee is seeing choppy two-sided trade, as the market is limited by a strong Brazilian crop but supported by tight near-term supplies and a slow export pace out of Brazil. ICE exchange coffee stocks were unchanged again on Monday, and they remain at 24 1/2-year lows. Traders are on the lookout for any indication that stocks are starting to recover and that tight supplies are starting to ease. After a one-day setback, the Brazilian real recovered yesterday and was approaching last week’s 3 1/2 month high. The strong currency eases pressure on Brazil’s farmers to market their remaining coffee supply. A USDA attache has forecast Colombia’s 2023/24 production at 11.5 million bags, up from 10.7 million in 2022/23. Recent rains in Brazil have improved the outlook for next year’s crop, but some growers are concerned that heavy winds could damage trees. Vietnam rainy season is coming to an end, growers expect the weather will be dry enough to finish the harvest.
March cocoa is still under the negative influence of last week’s technical reversal from 45-year highs, but barely so, and a move through the high at 4127 would reverse that situation. There is some rain in the forecast for West African growing areas starting Thursday and going through the middle of next week. This is bearish, as any extension of the wet weather should improve the main crop. The dry season normally begins in late November-early December, and its arrival would mean the beginning of the seasonal drop off in production. This year’s main crop is already far behind last year ago, and the gap seems to be widening. Ivory Coast port arrivals as of Sunday were 30% behind last year’s pace after being 25% behind the previous week. However, with prices at 45-year highs, traders are concerned that the market has already absorbed the most bullish expectations.
March cotton appeared to put in a harvest low earlier this month, but it probably needs further evidence of improving demand to continue its rally. Reports that farmers in Motto Grosso, Brazil are switching some of their plantings from soybeans to cotton due to the dry conditions pressured the market early yesterday, but it managed to recover most of its losses by the close. Normally about 10-13% of plantings go to cotton, but there is talk that they could reach 20% this year. The weekly Crop Progress report showed 77% of the US cotton crop was harvested as of Sunday, up from 67% the previous week and above the 10-year average of 61%. With the crop three-quarters complete, harvest selling pressure has eased. Rains in the Delta and Southeast could slow the harvest further and limit selling.
New threats to the beet crop in western Europe and a heavy rains in Brazil supported a sharp rally in sugar yesterday, but it was not enough to break out of the two-month consolidation. March sugar continues to hold its ground above the 50-day moving average, which it has touched for the past four sessions but has not closed below. Heavy rains and muddy fields in Europe are slowing and even threatening the beet harvest. There have been reports that 15% of crop in France has yet to be collected. Daily rainfall is in the forecast for Brazil’s Center-South regions from Wednesday through the middle of next week. This will also slow harvest and crushing activity and delay shipments to port facilities.
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