Cotton Crop May Stabilize
The cotton market is back in a consolidation mode as it faces a poor US crop but is concerned about demand. US cotton export sales for the week ending September 7 came in at 67,429 bales for the 2023/24 marketing year and 25,256 for 2024/25 for a total of 92,685. This was up from 91,693 the previous week and above the four-week average of 87,127. However, this was the fourth straight week that sales were below 100,000 after they came in above that level for the first three weeks of August. Cumulative sales for 2023/24 are the lowest for this point in the marketing year since 2016/17. They have reached only 47% of the USDA forecast for the marketing year versus a five-year average of 57% for this point in the season. In addition to Texas, drought has expanded into Louisiana, southern Mississippi, southern Alabama, and a corner of southwestern Georgia. Rainfall this past week in Texas could bring an improvement in crop conditions in Monday afternoon’s weekly Crop Progress report. A rally in crude oil to its highest level since last November is supportive to cotton as it makes man-made fibers relatively more expensive.
Cocoa extended its rally overnight to trade to another new contract high and another new all-time high on the nearby chart. West African supply issues remain a source of strength. El Nino has been cited as a reason to expect a third straight global supply deficit in 2023/24, but the International Cocoa Organization has said that pests and disease are a bigger concern than extreme weather. El Nino can bring hot and dry conditions to west Africa, but not every El Nino brings a drought. The problems this year have been mostly attributed to too much rain rather than a lack of. Low fertilizer and pesticide usage were cited as well. The head of Malaysia’s Cocoa Board said that cocoa’s global production deficit could increase and keep prices elevated as Asian growing nations will have difficulty increasing their output. Southeast Asia normally has drier than normal conditions during El Nino. The US Climate Prediction Center has given El Nino a 95% chance of continuing through the first quarter of 2024. The head of the West African cocoa initiative said that the EU is open to a proposal that multinational chocolate companies bear the cost of ensuring that cocoa shipped to Europe complies with the new deforestation rules. He also said that Ivory Coast will very soon resume forward sales. Brazil’s agriculture Ministry has identified the presence of mild mosaic virus in cocoa orchards in northeastern Bahia, the country’s largest producing state. The virus is invasive, there is no known cure, and infected areas are usually destroyed to prevent the spread. Brazil is the seventh largest cocoa producer in the world, but it is still a net importer, though it exports seasonally.
The coffee market starts today on track for a positive weekly reversal after receiving fresh support for its global demand outlook. December coffee traded to its highest level since August 31 overnight on follow through from yesterday. European restaurant and retail shop coffee demand may have received a boost from ECB post-meeting guidance that Euro zone interest rates have reached a plateau. ICE exchange coffee stocks were unchanged for a second day in a row, leaving them at their lowest level since November. The Brazilian real rallied 1% yesterday and reached a 2-week high, which eases pressure on Brazilian growers to market their supplies to foreign customers. But while Brazil’s Arabica harvest is nearly complete, coffee continues to flow towards port facilities, which means significant export movement could be seen out through November. Vietnam’s harvest season officially begins October 1, which should start to refill tight robusta supplies. The Arabica market has been receiving carryover support this week in the wake of a report from Vietnam’s General Department of Customs that January-August exports fell 5.4% from a year ago to 1.21 million tonnes.
The sugar market has overcome bearish supply news from Brazil and is on track for a fourth positive week in a row. Crude oil gapped higher overnight, and the nearby contract has reached its highest level since last November, which is supportive to sugar on ideas it will encourage cane crushers to favor ethanol production over sugar. However, ethanol’s relative attractiveness is diminished by high sugar prices, and Brazilian crushers have been leaning towards sugar this year. India’s Food Secretary Sanjeev Chopra said that his nation’s sugar stocks were at 8.5 million tonnes at the end of August, which he felt was sufficient to meet domestic demand over the next 3 1/2 months. He also mentioned that rainfall this month has helped cane crops in Maharashtra and Karnataka. India and Thailand sugar production in 2023/24 is expected to fall below the 2022/23 levels due to dry conditions brought on by El Nino. India established an export ban in response, which has helped them build domestic supplies. The US Climate Prediction Center is giving El Nino a 95% chance of lasting through the end of March.
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