COTTON
July cotton rallied sharply overnight to its highest level since May 10, breaking out above a four-day consolidation. US plantings are proceeding at an average pace, and ample soil moisture in West Texas is a marked improvement over the past couple of years. But the lack of a weather premium has left cotton vulnerable to short covering, especially if the weather turns bullish. So far, the weather has been looking pretty good, but heavy rains in the northern Delta this week could slow plantings. US cotton growers are facing decision points on whether to plant cotton, as they face prevent-plant deadlines to be eligible for crop insurance.
COCOA
July cocoa has found support at the 50% retracement of the entire move from the contract low to the contact high this week, despite recent improvements in the rainfall for west Africa. The outlook for the mid-crop is improving, but a large global production deficit is still expected for the 2023/24 marketing year, and another deficit, albeit smaller, is expected for 2024/25. West African cocoa trees will need additional rainfall over the next few months to improve their upcoming production. Rain is in the forecast on most days through early next week, which is not surprising given the region is in its rainy season, but it marks a dramatic improvement from earlier this month. The shift from El Nino to La Nina this summer could also improve crop prospects, provided it does not bring the excessive amounts of rain the region saw last summer, which slowed harvest and drying and brought on increased occurrences of black pod and swollen shoot diseases.
COFFEE
July coffee was up slightly overnight following yesterday’s breakout rally. An extended dry period in Minas Gerais, Brazil has raised concerns about their upcoming arabica crop, and dry conditions during April in Vietnam during have raised concerns about flowering for their new robusta crop. Earlier this week, USDA projected Honduras 2024/25 coffee production at 5.5 million bags, which would be down a substantial 24% from last year. They blamed disease and labor shortages. USDA forecast Colombia’s production at 12.4 million bags, up slightly from 12.2 million in 2023/24, which was revised higher from a previous forecast of 11.5 million. ICE exchange coffee stocks fell 2,025 bags yesterday with no grading taking place. They remain just below Monday’s 14-month high. London coffee prices also shot higher.
SUGAR
July sugar was unable to follow through on Monday’s outside-day higher close, but it continued to hold its ground above last week’s lows. Brazil’s major cane-growing regions have several days of rainfall in the forecast, and that may slow down harvesting and crushing operations into early next week, but it could also improve yields later this season. The 2024/25 harvest has gotten off to a quick start, with Center South sugar production running 66% above a year ago through the end of April, the first month of the new season. India’s 2024 monsoon is expected to arrive over the mainland on May 31, one day earlier than normal, and it is expected to bring above-average rainfall this year.
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