ADMIS News
COCOA
Obviously, concerns regarding midcrop production in the Ivory Coast have launched the cocoa market into a significant rally with the potential for a return to the late January highs up at $1130 improving by the day. We suspect the 2024 historic pricing action has commercial users on edge and concerned about another explosion in prices of the magnitude seen at the end of last year. In fact, recent pod counts at the Ivory Coast have rekindled tight supply concerns again which justified prices near $11,500 in last year’s bullish campaign. In fact, while African growing regions in the Ivory Coast, Ghana and southeastern Nigeria currently have moisture prospects that did not discourage yesterday’s massive range up rally and today’s early higher trade (which has prices just under four month highs). Furthermore, in a recent positioning report the net spec and fund long in cocoa was 50,000 contracts below the levels seen in the fourth quarter of 2024 explosive rally which means the cocoa market retains significant speculative buying capacity. Yet another underpin for the bull camp is extremely tight exchange stocks in London which are down 43% from last year. However, ICE exchange stocks this week reached the highest levels since September 2024 which could result in New York cocoa underperforming London on what could be another record rally ahead.
COFFEE
Unlike cocoa, the coffee market is entrenched in a pattern of lower highs and lower lows and is approaching a critical July contract “pivot-point” price at 360. Unfortunately for the bull camp, Brazilian harvest supply looms and forecasts for this year’s production were raised nearly 8% by CONAB while the consulting firm of Safras & Mercado boosted their “all coffee” production by 4.8% earlier this week. In short, the supply side of the equation has become entrenched in the bear camp, especially with the Brazil harvest expected to gather momentum in the face of dry weather directly ahead.
COTTON
Despite the slight recovery bounce off this week’s spike low, the path of least resistance remains down in cotton especially given evidence of soft US export sales and more favorable US production prospects. Clearly, the most recent WASDE report set a bearish environment with planted area and production boosted versus last year. In fact, Texas cotton regions have seen favorable growing conditions since early last month, and that dramatically reduces supply uncertainty for the crop and that is likely to encourage ongoing short selling. As in the number of other physical commodity markets, the cotton trade is likely to face a persistent flow of bearish supply and demand fundamental headlines from both internal and external sources. Furthermore, Managed-Money has dramatically reduced its net short positioning (from 80,000 contracts short in early March to only 21,000 short last week) and that should provide fresh selling fuel in the weeks ahead, especially if Texas production conditions remain good.
SUGAR
Clearly, forecasts of large global surpluses from a New York sugar conference for the 2025/2026 season prompted this week’s slide in prices. However, the International Sugar Organization partially countered the bearish New York sugar conference forecasts by raising its 2024/2025 global sugar deficit to 5.4 million metric tons from an initial forecasted deficit of 4.8 million metric tons. However, a slightly tighter carryout/ending stocks from last year should provide some cushion as 2024/2025 deficit was the largest in nine years. A major component of the downward revision last year was worse than expected Indian and Pakistani production and that means this year’s Indian monsoon will be very important! However, the trade is looking ahead not backward and therefore a forecast for an early Indian monsoon start from the Indian weather service should add to the bearish track as a wet start could lead the market to assuming a generally favorable season. On the other hand, massive Brazilian ethanol production with robust cane crushing should cushion prices. However, the markets did see a surprisingly large and perhaps temporary drop in Brazilian cane crushing last month because of adverse weather.
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