Promising 2026/27 Coffee Crop?

COFFEE

December Coffee gapped lower overnight after reaching its highest level since May 1 yesterday. News that a major trade house has lowered its expectations for Brazil’s 2025/26 arabica crop to 36.5 million bags from a previous estimate of 38.7 million and from 44.7 million for 2024/25 could be the culmination of bullish news factors that have supported a 110-cent, 40% rally since August 1. Those factors include a drawdown in ICE stocks due to the 50% tariffs on Brazilian imports into the US and ideas that the recent frost event in Brazil had damaged next year’s crop.  2025/26 is an “off year” in the Brazil’s arabica crop cycle, so a drop from 2024/25 is expected. However, 2024/25 production was also disappointing for an on-year crop. The outlook for 2026/27 crop year may be more promising due to the rains that fell between last November and this past March, but there are also concerns that the recent cold snap may have done some damage. World Weather Service says the damage was in a relatively small area and was limited to the tops of trees. Uganda’s coffee exports totaled 997,105 bags in July, up from 821,593 for the same period a year ago, according a report by their agriculture ministry. Uganda is Africa’s largest coffee exported and primarily ships robusta beans. Typhoon Kajiki moved into northern Vietnam yesterday, producing strong wind, heavy rain, and flooding in some coffee production areas that could result in some damage to property and crops.

It is possible the market has rallied too far, too fast. December Coffee closed a gap from April 30 yesterday and came up short of taking out the contract high from April at 399.65. Momentum indicators suggest an overbought condition, and stochastics have crossed to a sell signal from a high level.  Open interest has climbed on the rally but volume has fallen for the past four sessions.

COTTON

December Cotton fell below the recent consolidation overnight to its lowest level since August 12. The market rallied on Friday in the wake of the Fed Chairman’s speech in which he indicated a rate cut is likely for September which pressured the dollar and improved US export prospects, but it could not build on that momentum. Yesterday’s Crop Progress report showed 54% of the US cotton crop was rated good/excellent as of August 24, down from 55% the previous week but up from 40% a year ago and above the five-year average for this date at 44%. Texas was 45% G/E, down from 49% last week but up from 26% a year ago and above the five-year average at 30%. The report also showed 20% of the crop had bolls open as of August 24, up from 13% the previous week but down from 24% a year ago and  the five-year average for this date is 22%. World Weather Service says dryland cotton in southwestern parts of West Texas needs significant rain. Some showers are possible late this week into the weekend, but no general soaking rain is predicted. Temperatures will be cooler than usual during the next seven days, which will conserve soil moisture and slow crop growth rates. US Delta crops have dried out greatly resulting in some crop stress. Rain is possible later this week and into the weekend offering at least some relief. The market needs a demand spark, as US export sales are currently the slowest in 10 years.

COCOA

December Cocoa was lower overnight following a rally yesterday off of Friday’s two-week lows. Ivory Coast cocoa arrivals totaled 10,000 metric tons for the week ending August 24, steady with the previous week and up from 8,000 a year ago. Cumulative arrivals since the marketing year began on October 1 have reached 1.663 million tons, down 1.9% from this point a year ago. Ivory Coast farmers interviewed by Reuters said more sunshine and rains were needed starting in September to boost the upcoming main crop. Rains were mostly well below average last week. Farmers said many pods were growing on trees, but the next month’s weather would determine their size. Overcast weather could trigger disease. World Weather Service expects rains to stay north of the key production areas in Ivory Coast and Ghana for the next week to 10 days. A delay in the rains could cause concern.

SUGAR

World Weather says Brazilian sugarcane areas will not be vulnerable to any crop threatening cold weather in the next two weeks, but rainfall will be minimal. There have been reports of fires in cane fields due to dry conditions, something that was a major concern last year at this time and which may have had something to do with the lower crop this year. A Reuters poll of 10 analysts has expectations for Brazilian Center-South production this year to come in around 39.7 million metric tons, down from a forecast of 41.6 million in February and below the last year’s 40.2 million. The UNICA reports have supported this trend, with the latest report showing cumulative production as of August 1 was running 7.8% below a year ago. The next report, which will cover the first half of August, should be out late this week. On the bearish side, Thailand and Indian weather have been favorable for a strong crop.

Interested in more futures markets?  Explore our Market Dashboards here.