Global Cocoa Surplus Predicted

COCOA

September Cocoa is sharply lower this morning, falling below the 200-day moving average and the June low to its lowest level since April. Yesterday Reuters reported that the consultancy Commodity Risk Analysis has forecast a 325,000-ton global cocoa surplus for the upcoming 2025/26 season, which they said was the first surplus in three years. They credited investments in cocoa production in Ecuador, Peru, Nigeria and Brazil in the wake of higher prices. In February, the ICCO forecast a global surplus of 142,000 tons for 2024/25, so we’re not what CRA expects for 2024/25. Regardless, this suggests supply will continue to loosen. There  were also reports yesterday the Ghana may start its main crop sales in August this year and raise prices paid to farmers in a bid to deter smuggling. West African growing areas continue to see enough rains to support production for the main crop. Word Weather Service expects 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.

COTTON

December Cotton is lower this morning following a mild rally yesterday and overnight in the wake of news that a trade deal had been reached between the Trump administration and Vietnam. Details on the agreement are limited, but it puts the tariff on goods imported on certain products from Vietnam at 20%, which is an improvement over the 46% tariff announced in April. The fact that this deal is with Vietnam is not lost on cotton traders, as Vietnam has been the biggest buyer of US cotton in recent years. Shares of Nike, Under Armour, and VF Corp. (maker of North Face)  rallied on the news. World Weather Service says weather in West Texas will be favorably mixed during the next ten days to two weeks. Eyes will be on the export sales report this morning, though it may take a back seat to the jobs report and any other announcement on trade deals.

SUGAR

October Sugar is sharply higher this morning after falling to its lowest level since January 2023 yesterday. At yesterday’s low, the market had declined 22% from the March high and 30% from the contract high in 2023, leaving it vulnerable to short covering. The recent leg of the selloff has been predicated on strong production expected this year from Thailand and India, both of which have had strong starts to their monsoon rains. However, weather forecasts are looking a bit less than ideal. World Weather Service said that some of Thailand’s sugarcane areas are expecting net drying conditions for a while that may eventually threaten production. Previous rain has the region currently rated favorably. In India, rains in the central, north and eastern parts of the nation could produce some local flooding and some crop damage that would warrant replanting, while west-central and southern parts of the nation India are expected to see unusually dry conditions over the next ten days. Southern Brazil will experience net drying over the coming week and that should eventually lead to improved field working conditions.

COFFEE

September Coffee fell to its lowest level since November yesterday but closed well off that low and is slightly higher this morning. At yesterday’s low, prices had declined 32% from the contract high in April, which put the market in a temporary oversold situation. Brazil’s largest coffee co-operative, Cooxupe reported yesterday that its farmers had harvested 31.4% of their expected crop as of June 27, up from 24.3% the previous week but below the 42.3% reported at the same time last year, and the slower pace may be easing harvest pressure a bit. World Weather Service does not expect any crop threatening cold in Brazil over the next week despite a cooler air moving in this weekend. Indonesia is expected to see an erratic rainfall pattern through the next week, with most areas seeing rain eventually but some areas could still be on the light side.

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