London Coffee Leads NY

COFFEE

July NY (arabica) Coffee broke out above the a six-day consolidation pattern overnight, paving the way for a test of the April contract high. July London (robusta) Coffee extended its gains overnight after making a new contract high yesterday. Concerns over Vietnam’s robusta supply remain, and the London market continues to lead NY. There have been repeated reports of Vietnamese farmers being reluctant to sell. Colombia’s National Coffee Federation reported yesterday that the nation produced 1.12 million bags of washed arabica coffee in May, up 39% from the same month last year. Exports totaled 933,000 bags, up 10% on the year. The International Coffee Organization reported global green coffee exports totaled 10.77 million bags in April, up 15% from a year ago, led by larger volumes for arabica and robusta. The departure of El Niño is expected to bring better growing weather for Vietnam, but near term supplies tight. La Niña is expected arrive later this summer. It could bring more rains to Vietnam but colder, drier conditions for Brazil.

COTTON

This is the first year in the past three that the cotton market does not have “Texas drought” hanging over it, which probably is why the it is finding itself under pressure at the start of the growing season. The forecast for Texas is looking a little hotter and drier than it was earlier in the week. The 6-10 and 8-14 day forecasts have below normal chances of rain in the Delta but above normal and normal chances for west Texas. Hot weather stays in the west in the 6-10 day and moves east in the 8-14. Traders will be looking to this morning’s export sales report to see if US cotton sales can keep up their steady, slightly impressive pace. Last week’s report showed net sales of 300,734 bales for the week ending May 23. Sales have been above 250,000 for the past four weeks and above 225,000 in six out of the past seven. Shipments have been less impressive lately, totaling only 172,195 last week, which was the lowest since January. Renewed optimism for a Fed rate cut in September could boost demand expectations.

SUGAR

July Sugar broke out above of a three-week consolidation pattern this week, which is bullish technical action. The UNICA report last week showed Brazil Center South sugar production was not running as far ahead of last year’s pace during the first half May as it was during the second half of April, which makes the production outlook is a little less bearish. Their harvest season, which officially began on April 1, got off to a strong start because of dry conditions there, but that could eventually pull yields down. India’s prospects are looking better with the departure of El Niño. The monsoon arrived a few days early, and it is expected to bring above average rainfall this year. This may give them room to allow exports, but the government is also interested in boosting ethanol production, which may make them less inclined to allow imports. Growers are reporting mixed weather in Thailand. Some areas are better, others not so. They are supposedly going to benefit from the departure of El Niño as well.

COCOA

July cocoa gapped higher overnight, and it seems intent on testing Monday’s high that came in the wake of a bullish supply/demand update from the ICCO from last Friday. The market is watching weather in west Africa for the mid-crop after extreme heat and dry conditions this spring dried soils and stressed trees. The region is in its wet season now, which has cooled things off a bit and improved the outlook for later in the season. Growers reported below average rainfall last week, and the conditions this week are varied. The ICCO report last week showed a global deficit of 439,000 tonnes for 2023/24 versus 374,000 in their first quarter update. Production was increased by 11,000 tonnes, but grindings were increased by 76,000. Increased optimism for a for rate cuts by ECB (today) and the US Fed (in September) could be supportive to demand.

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