ADMIS News
COCOA
Demand destruction should eventually bring an end to the unprecedented rally in cocoa, but the market is showing no signs of that happening yet. There were reports yesterday that west African producers were starting to hoard their newly harvested beans, leading to a slowdown in grinding activity in Ivory Coast and Ghana. There are also reports the candy manufacturers are being confronted with having to raise prices, reduce the size of their chocolate bars, and reduce the amount of cocoa in their products but that this takes time to implement. The US Climate Prediction Center said there is an 83% chance that El Nino will end during the April/June timeframe and a 62% chance of a La Nina event developing during the June/August timeframe. La Nina normally brings wetter than normal conditions to interior West African regions, and that could provide relief to cocoa trees in front of the 2024/25 main crop harvest, provided it doesn’t bring too much rain.
COFFEE
The coffee market felt some pressure yesterday by Rabobank’s forecast for a 4.5 million-bag global surplus in 2024/25, which would be up from a 500,000-bag surplus in 2023/24. However, a slow start to new crop sales, recent dry weather in Brazil, and the prospect of a harsh winter in Brazil provide underlying support. Yesterday, Safras & Mercado reported that Brazilian farmers had sold 14% of the 2024/25 Arabica crop as of Tuesday versus an average of 30% for that date. A La Nina weather pattern is forecast to start in June-August, which could result in a harsh winter for Brazil, and this may also be keeping farmers from committing their new crop. The lack of rainfall in Brazil has also raised concerns about the upcoming crop, but some rain is in the forecast for next week.
COTTON
May cotton could be heading for a more significant correction of November-February rally, but the market’s need to bid for acres against soybeans may prevent a big selloff. The bulls were likely discouraged by the market’s decline yesterday despite an improvement in export sales. The weekly exports report showed US cotton sales for the week ending March 7 at 85,845 bales for the 2023/24 (current) marketing year and 112,728 for 2024/25 for a total of 198,573. This was up from 67,089 the previous week and was the largest since February 1. It was also the largest 2024/25 sale so far. Soil moisture conditions are much better than they were a year ago, which could support heavier plantings this year and a better start for the crop. The Prospective Plantings report on March 28 will provide the first official surveyed view of the crop this year. Rains in Australia, Argentina, and Brazil this week are expected to slow cotton harvesting, which could keep near term supply tight. The approaching harvest in the Southern Hemisphere should eventually slow US export demand.
SUGAR
Analysts are dialing back their forecasts for Brazil’s upcoming Center-South cane crop due to drier than normal weather, and this could support an extension of the rally off the March lows. Rabobank said there is a significant deficit looming in the market, thanks to an overall shortage of cane availability in Brazil. Earlier this week Unica reported that 28 of Brazil’s Center-South sugar mills were expected to restart their crushing operations during the first half of March versus 10 mills for the same period last year. This seems to counter the idea of tight cane supply. The US Climate Prediction Center is giving a 62% chance that a La Nina weather event will develop during the June/August timeframe. La Nina normally results in higher-than-normal precipitation for cane growing regions in India and Thailand, which could result in higher sugar production from both nations in the 2024/25 and 2025/26 marketing years.
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