London Coffee Supports NY Coffee?

COFFEE

July NY coffee saw a modest reversal yesterday after failing to approach the April contract highs. July London coffee reached a new contract high yesterday, and this could lend support to NY coffee if London resumes its uptrend today. Vietnam’s Agriculture Ministry said that their 2023/24 coffee production will be down 20% from last season due to the earlier than normal dry season this year. The departure of El Nino this spring is expected to bring wetter conditions, but it appears that too much damage has been done to the current crop. The Vietnam Statistics Office said that their January-May coffee exports were down 3.9% from the same period last year. Brazil’s Conab is estimating the nation’s 2024 coffee growing area at 2.25 million hectares, with 1.9 million in production and another 345,000 in the development stage. Of the area in production, 1.53 million hectares are growing arabica and 384,000 robusta. Conab expects Brazil to produce 58.81 million bags of coffee this season, up 6.8% from 2023. Farmers report harvest is going well, but uneven fruit ripening is a concern.

COCOA

July cocoa extended its rally overnight but gave back those gains as the session progressed. The market came up short of testing the 0.618 retracement of the selloff from the April high to the May low, and this may put the bulls back on their heels. The ICCO is due to release its quarterly update on the cocoa supply/demand balance in the next few days, and this could be making traders cautious. A large global deficit is expected for the 2023/24 season. The arrival of the rainy season in west Africa could boost late mid-crop production, but growing areas need consistent rainfall over the next few weeks. Nigeria reported that their April cocoa exports were 111% above last year but were 5.7% below March. The Ghana Cocoa Board (COCOBOD) is set to introduce aggressive measures aimed at addressing the problem of growers leasing their farms for something other than cocoa production, such as illegal gold mining. This follows efforts on COCOBOD’s part to help restore farms.

COTTON

July cotton has stalled in its recovery move, as initial US production prospects are strong. The weekly crop progress report on Tuesday showed 60% of the US crop was in good/excellent condition versus a 10-year average of 48% for this time of year. Last week’s Drought Monitor showed only 6% of the US crop was in an area experiencing drought versus 36% a year ago and 52% the year before that. The Dollar Index reached its highest level since May 14 overnight, and this makes US cotton less competitive on the global market. There will be some uncertainty about final acreage given the low prices during the planting season. This could keep market action choppy ahead of the USDA acreage report at the end of June. Monsoon rains hit India’ southernmost Kerala coast a few days earlier than expected today, and this a beneficial sign for their cotton crop. Last year’s monsoon was late and rain amounts were below average. The expected departure of El Nino and the subsequent arrival of La Nina this summer is expected to bring above average rainfall. The arrival of the monsoon should also bring relief from the heat wave that has seen daily highs reach 122  degrees Fahrenheit. The Punjab region of Pakistan missed the cotton sowing target for 2024/25. There were an estimated 3.4-3.5 million acres sowed, 19% less than the 4.15-million-acre target. The weekly US Export Sales report is delayed until Friday due to the holiday this week.

SUGAR

July sugar is lower this morning and is threatening to take out its 14-month low from earlier this month. Monsoon rains hit India’s southernmost Kerala coast today, a few days earlier than normal, and this should be beneficial to their cane crop. Rain usually begins around June 1 and spreads around the county by mid-July. This will also bring relief from a heat wave that has seen maximum temperatures of 122 degrees Fahrenheit. India’s Meteorological Department is expecting the monsoon rainfall to come in 106% of their long period average. The Brazilian real fell to its lowest level in five weeks yesterday. This increases the incentive for mills to sell sugar. The Unica Brazil Center-South sugar production report for the first half of May is due out any day. An S&P Global survey calls for production to be up 6.3% from last year. Second-half April production was 84% higher than last year. The marketing year officially began on April 1, and it got off to a quick start due to dry weather, but this could haunt production as the season progresses. The CEO of Tereos, Brazil’s second-largest sugar producer, said he was reasonably bullish for raw sugar futures due to dry weather in the Center-South region of his country. He was less clear on the European beet crop due to wet weather and the threat of yellows disease.

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