March Coffee Extends Selloff

COFFEE

March Coffee extended Friday’s steep selloff a bit early Monday. At Friday’s low, the market had given back 0.618 of the rally from the December 19 low to last Thursday’s high. Worries about US/Colombia relations in the wake of bellicose talk between President Trump and the Colombian President faded last week after there were reports that the two has spoken over the phone. Colombia is the number-two producers of arabica coffee in the world and the number-two supplier to the US. Last Thursday, Colombia reported its December washed arabica production at 1.233 million bags, down from 1.798 million a year prior. This was the third straight month production had been behind year ago levels. Their 2025 total output was 13.377 million bags, down from 13.977 million in 2024. This was the first time the 12-month total had fallen behind year-ago levels since November 2023, but it was not a big surprise, as the nation is coming off a particularly strong year and production had been trending lower for several months. There are expected to be a total of about 30,000 to 40,000 lots of index-related buying during January 8-14, and there were estimates of 4,000 to 5,000 lots being bought the first day.

COCOA

March Cocoa was slightly lower early Monday, extending Friday’s steep selloff to its lowest level since November 28. Traders are perhaps concerned that the fourth quarter 2025 grind data from Europe, Asia, and North America, scheduled to be released on January 15, will produce bearish outcomes. Europe’s third-quarter grind was 4.8% below a year ago. It has been below year-ago levels for five straight quarters and in nine out the past ten. The recent decline in grind has been attributed to high prices, but it was already lagging due to the expansion of capacity in Africa. Asia’s grind had declined for three quarters straight. The North American grind was 3.2% above year ago in the third quarter, but it too had experienced a general decline during the previous four years, prior to the jump in prices, also likely due to the expansion in Africa. There may have also been some disappointment that the cocoa futures did not see a stronger advance after the expectations for heavy spec buying with the inclusion of the NY cocoa contract in the Bloomberg Commodity Index. There has been talk that there would be some 30,000-40,000 contracts bought during January 8-14. There were reports of 4,000-5,000 being bought on the January 8.

SUGAR

March Sugar was lower early Monday, reaching its lowest level in four sessions. Traders may be on the lookout for reports of Indian export sales after reports last week that mills had signed contracts for around 180,000 metric tons of sugar so far this season. The government has permitted exports of 1.5 million tons in this year, and this was the first (unofficial) indication that sales had been made. Thailand’s Sugar Board said on Friday that it expects the nation’s sugar output to reach 10.3 million tons for 2025/26. This is close to the USDA forecast for 10.25 million and is up from roughly 10.0 million in 2024/25. For 2026/27, the Board is looking for production to fall back to 10 million. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 7,885 contracts of sugar for the week ending January 6, increasing their net short to 142,922. This is up from a net short of 206,000 in November but it is large enough to leave the threat of short covering. There has still been no indication from UNICA when they will release their Brazil sugar production data for the first half of December.

COTTON

March Cotton was higher early Monday following a selloff from a two-month high last week. The market is likely seeing some consolidation ahead of today’s USDA supply/demand report, though the trade does not appear to expect many significant revisions from the December update, particularly in the US numbers. A Bloomberg survey has an average trade expectation for US 2025/26 cotton production at 14.20 million bales (range 13.77-14.55 million), which would be -70,000 bales million from the December update.

The dollar was sharply lower overnight in the wake of the Justice Department subpoenas against Federal Reserve Chairman Powell. This was after the dollar had reached its highest level since November 28 on Friday. A weaker dollar help boost US export prospects, but there are several other issues that affect US exports, namely trade relations in the wake of US tariffs, competition from Brazil, and the global demand outlook. China has been a big importer in the past, but they have been sourcing primarily Brazilian cotton in recent years when they have needed it, and their import needs may have dropped as their domestic crop improved this year. China on Friday lowered its 2025/26 cotton production forecast by 0.90% to 6.64 million metric tons on Friday, down from 6.70 million estimated in December. Imports were left unchanged at 1.40 million. Market participants were also awaiting a Supreme Court ruling on President Trump’s tariffs, but no ruling was issued on Friday.

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