ADMIS News
SUGAR
The sugar market has reached contract highs on expectations of lower production out of Asia due to El Nino, but Brazil is expected to see record sugar exports this season, which could offset a good portion of those declines. October sugar fell from a new contract high into negative territory on Friday and finished with a negative reversal day, which could start the market out on the defensive this week. Dry weather has been conducive to harvest and crushing activity, and mills are keeping sugar’s share of crushing high strong despite high crude oil and gasoline prices. At the G20 summit on Saturday, India announced the launch of a new global alliance to boost the use of biofuels. The alliance also includes the US and Brazil. India intends to double its the nationwide blending mix of ethanol into gasoline to 20%. They plan to build 12 bio-refineries to produce fuel from items including crop stubble, plant waste, and municipal solid waste. Indian sugar refiner stock prices have surged overnight on the news. India’s August rainfall was 36% below average, and the lowest for that month since at least 1901, and this is expected to cause problems for their 2023/24 and 2024/25 cane crops.
COCOA
The long-term uptrend in the cocoa market remains in place, as low production out of West Africa is expected to keep supplies tight. Cocoa arrivals at Ivory Coast ports totaled 5,000 tonnes for September 4-10, down from 12,000 for the same period last year. Total arrivals since the marketing year began October 1 had reached 2.321 million tonnes, down 4.6% for the same period last year. Over the weekend, Ghana announced that their 2023/24 guaranteed cocoa price paid to farmers would increase by 63% from this season to prevent smuggling of beans to neighboring countries. Cameroon announced that their 2023/24 fixed farmgate price would be 25% above the 2022/23 price. A group of major Ivory Coast cocoa processing firms said that their July grindings were 5.7% above last year, which would put 2022/23 grindings to date at 10.5% ahead of last season’s pace. The net long is hovering around record levels, which leaves the market vulnerable to heavy long liquidation if support levels are violated.
COFFEE
Strong production out of Brazil and Honduras continue to weigh on December coffee, as the market approaches its August low and comes within striking distance of the 2 1/2 year low from January. 2022/23 global Arabica exports through the end of July were 10.3% behind the previous season’s pace, but as more of Brazil’s recently harvested coffee reaches port, that deficit should decrease. Colombia’s annualized production pace remains close to a 9 1/2 year low, but it has shown modest improvement in June and July. Friday’s Commitments of Traders report showed managed money traders were net buyers of 1,249 contracts of coffee for the week ending September 5, reducing their net short to 31,206. This is approaching the biggest net short for 2023 at 40,480 contracts but is still well above the record net short of 109,000 from 2018.
COTTON
We expect to see December cotton consolidate ahead of Tuesday’s USDA supply demand report. The dollar has had its longest weekly winning streak since 2014, which does not bode well for US cotton exports. Weekly export sales are slow, but despite all the concerns about China’s economic health, they have been largest buyer this year. The weather in the southern US is becoming less extreme, and here are increased chances of rainfall in Texas. However, this may be too late to offer much help to the crop. Central Texas is expected to receive as much as 400% of normal rainfall in the next seven days. US cotton export sales for the week ending August 31 came in at 85,093 bales for the 2023/24 (current) marketing year and 6,600 for 2024/25 for a total of 91,693. This was up from 72,438 the previous week but below the four-week average of 110,525. Cumulative sales for 2023/24 have reached 45% of the USDA forecast for the marketing year versus a five-year average of 56% for this point in the season.
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