Cotton Choppy Ahead of WASDE

COTTON

July Cotton is higher this morning following a two-day selloff. The market has been consolidating since putting in a two-month high in April, but it has also managed to stay well above its post-tariff lows from earlier that month. It may be getting some support from lower dollar this morning after it reached its highest level since April 10 yesterday and overnight. A couple of weeks ago the nearby dollar index fell to its lowest level in more than two years, which is one supportive factor for US export prospects.

Monday’s USDA supply/demand report will be the first to include 2025/26 forecasts. A Bloomberg survey has an average trade expectation for US 2025/26 cotton production at 14.22 million bales (range 12.90-16.35), which would be down from 14.41 million for 2024/25 (based on lower plantings this year). Exports are expected to come in at 11.56 million (range 9.90-14.30) versus 10.9 million in 2024/25, and ending stocks are expected at 5.35 million (range 4.00-7.20 million) versus 5.00 million last year. World 2025/26 production is expected to come in at 118.36 million bales versus 120.89 last year, and consumption is expected at 116.56 million bales versus 116.02 million in 2024/25. This would put ending stocks at 78.11 million bales versus 78.86 million last year.

COFFEE

July Coffee is higher this morning and may be pulled higher yet if a risk-on mood develops off the upcoming trade talks between the US and China. Colombia’s National Coffee Federation reported yesterday that the nation produced around 703,000 bags of washed arabica coffee in April, down from 742,000 bags a year prior. This was the first time production came in below year-ago levels since February of last year. The 12-month total was 14.954 million bags, down from 14.993 million last month but still the second-highest since 1993. The Illycaffe chairman said yesterday that he believes coffee prices have passed their peak level. He also said it is difficult to calculate the drop in Brazil’s arabica crop but that the drop is not huge,  and he added that Brazil’s 2026 crop could be an all-time high. Kraft Heinz, which sells Maxwell House Coffee, has asked its suppliers for 60 days’ notice before hiking prices due to the tariffs, according to a document seen by Reuters. The company asked suppliers to raise prices only if the tariffs are permanent and to immediately reverse them if the levies are removed. They may not have much pull in this fight. Under the Green Coffee Association contract, which covers most shipments to the United States, tariff costs imposed at the market of destination “shall be borne by the buyer.” World Weather Service expects limited rainfall in Brail coffee growing areas in the next 7-10 days with temperatures near to above normal. ICE certified stocks decreased by 7,115 bags yesterday to 837,358 after reaching their highest level since February 13 on Wednesday. However, the amount pending grading increased by 17,643 bags on Wednesday and another 18,892 yesterday to reach 113,725, their highest since February 20.

COCOA

July Cocoa was higher overnight, and looks poised to test the 100-day moving average this morning. A generally upbeat mood across the markets in anticipation of the talks scheduled for the weekend between the US Treasury Secretary and China’s top economic official may be boosting demand expectations. Growing conditions in West Africa have improved over the past few weeks, but demand (1Q grind) numbers have been better than expected in the face of high prices. Dealers told Reuters that they noted grading of a steady stream of cocoa, most recently from Nigeria, was bolstering tenderable supplies. World Weather Service expects showers and thunderstorms to occur regularly through the next week with most areas impacted at one point or another and that precipitation will be sufficient to support normal crop development. ICE certified stocks decreased by 4,309 bags yesterday to 2.1037 million after reaching their highest level since September 27 on Wednesday. This was the first daily decline in 3 ½ weeks.

SUGAR

July Sugar reversed higher yesterday and extended its rally overnight after bouncing off the 17.00 level for the second time in five sessions yesterday. The next UNICA report, covering Brazilian center-south sugar production for the second half of April, is due out next week, some time prior to Friday. The market was caught by surprise when the first-half April report came in higher than expected. This was attributed to dry conditions during the period that allowed for an active harvest pace and boosted sugar content in the cane. This has led to expectations that the rains the area received during the second half of April will pull production lower for this report, maybe not below the first half of April, but below year ago levels. Dealers interviewed by Reuters mentioned that cane crush could be about 40% below the same period last year. In the first half of April, center-south crush cane came in at 16.598 million tons, up from 16.117 million a year ago (+3%), and sugar production was 731,000 tons, up from 722,000 for the same period last year (+1.3%). Brazilian government data released yesterday showed sugar exports totaled 1.56 million metric tons April, down 18% from the a year ago. A US FAS report yesterday forecast Argentina’s sugar exports for 2025/26 to fall to 515,000 metric tons (raw value), driven by significantly lower beginning stocks and more favorable returns from ethanol production under the domestic biofuels blend mandate.

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