Cotton Awaits Tariff Deals

COTTON

December Cotton was higher overnight, taking back some of the losses it incurred on Monday when the US plantings number came in well above expectations. US crop conditions are above average as well, and only 3% of the US production is in an area experiencing drought. July 9 is the official deadline for any trade agreement between the US and other countries to avoid the punitive tariffs. An imposition of the tariffs could invite retaliatory action by the buyers of US cotton. Traders will be on the lookout for deals between the US and Vietnam, Pakistan and China, which were headed towards steep tariffs before they were postponed. The dollar fell to a new low for the move yesterday but was higher overnight. The lower dollar improves US export prospects but will be overshadowed the tariffs. Crude oil is higher this morning, which could lend support to cotton, and the US jobs report on Thursday could also command attention as this would have implications on the dollar and the health of the overall economy, which is critical for cotton demand.

SUGAR

October Sugar is higher this morning, but that was after it fell to its lowest level since January 2023 yesterday. Ample monsoon rains in Thailand and India point to strong cane production this year, but southern India needs rain. Brazilian production was down significantly from year ago levels during the first half of June, but the fact that a larger percentage of the cane crushing went to sugar versus ethanol is being viewed a sign that sugar production continues to be more profitable than ethanol. That being said, sugarcane technology company CTC said that cane yields in center-south Brazil fell 12% to 80.8 metric tons per hectare in May from 91 tons last year, a 12% decline. World Weather Service says despite the advancement of the monsoon parts of southern India have been drier or much drier than normal since late May and will remain drier biased for at least the next seven days.

COFFEE

September Coffee edged lower overnight on a lack of threatening weather and an advancing harvest in Brazil. The coffee research group Cepea reported yesterday that last week’s frosts did some damage in Parana, Brazil, but that is not a major producing area. Cepea added that the 2025/26 arabica coffee season had not been affected by the weather. They said that as of late June, Minas Gerais harvest activities hit 30% in the south and 20% in Cerrado. As for robusta, harvesting had reached 70% in Espírito Santo state.  World Weather Service says that the very cold air mass over Argentina this week is not expected to reach the coffee areas of Brazil and that mild to warm temperatures are expected through mid-week with a slight bit of cooling during the weekend. Vietnam has seen needed rain this week, as did Indonesia. Indonesia could see an erratic pattern of showers and thunderstorms through the next week, with most of the resulting rainfall variable and mostly light to locally moderate. Most coffee areas should get rain eventually, but there is a good chance that amounts will continue to be lighter than usual in many areas.

COCOA

With no change to the weather forecast for West Africa, March Cocoa extended yesterday’s selloff slightly overnight and approached the 200-day moving average. It has not closed below that line since October. Ivory Coast farmer interviewed by Reuters on Monday cited adequate soil moisture and abundant flowering on trees.  World Weather Service says West Africa could see showers and thunderstorms during the next week, with daily rainfall erratic and mostly light to moderate. Nearly all of the region from Ivory Coast to Nigeria and Cameroon will be impacted by rain at one time or another by mid-week next week.

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