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Potential Reversal Lower?


July coffee has a potential reversal lower pattern going today after opening above yesterday’s high and trading below yesterday’s low overnight. Brazil’s largest co-op, Cooxupe, said that they expect Brazilian 2023/24 coffee exports to reach 46.3 million bags, which would be a record high. They also estimated the nation’s 2025/26 robusta production to exceed 2024/25, if there is good weather. Traders are concerned that the recent rains in Vietnam have arrived too late to help the crop because damage to flowering has already occurred. A report from coffee trading firm Volcafe put Vietnam’s 2024/25 production at 24 million bags, the lowest in 13 years. They said poor rainfall has caused “irreversible damage” to coffee blossoms. They also blamed a lack of fertilizer usage and a loss of acreage to durian trees. They forecast a global robusta deficit of 4.6 million bags in 2024/25, which would be smaller than the 9-million bag deficit in 2023/24. On the other hand, shortages could be offset by increased exports from Brazil.

coffee spilling from cup


July cocoa has held support at the 50% retracement of its entire move, and it could hold that level until there is solid evidence that the recent rainfall in west Africa is helping midcrop production. Traders are concerned that many west African growers continue lack adequate fertilizer and pesticides. The region is well into its rainy season, with daily rainfall in the forecast for most days through late next week. This should help to reduce soil moisture concerns that supported the market earlier this year.


July cotton appears to have put in at least a temporary low after its 28% decline from the February high had left it with little weather premium. Cotton is also in the position of having to bid for acres against wheat, corn, and soybeans, which have been heading higher recently. Growers have reached or are still approaching prevent-plant dates for crop insurance, when they need to decide which crops they will grow. July cotton closed 3 cents higher yesterday, the limit for the day. The limit expands to 4 cents today. A modest net short held by the funds had left the market vulnerable to short covering, and the move above the 21-day moving average for the first time since March sparked some technical buying as well. Traders will be looking to see if the US export sales pace is still strong in today’s US export sales report.


July sugar has chopped around in a relatively narrow range over the past six sessions, and there is some divergence with momentum indicators, keeping the idea that the market may have put in a significant low alive. Brazilian sugar production for 2024/25 has gotten off to a strong start, and the anticipated end of El Nino this summer has improved the outlook for this year’s cane crops in Thailand and India. But traders are concerned that the extended dry period in Brazil earlier this year, which has helped harvest and processing get off to a fast start, could eventually pull yields lower. The trade is girding for the next Unica supply report, which will cover the first half of May and could come next week.


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