Tariff Exemptions for Cocoa Exports?

COCOA

Nearby cocoa supplies are tight, and the market is awaiting the arrival of the West African main crop, which officially begins October 1. Ivory Coast growers say pod growth is good but they will need more rain eventually. Conditions have been dry for the past several weeks, but that is typical for this time of year. World Weather Service expects little change in the weather over the next week or so, with only intermittent light rains expected in the main growing areas. The rains should start to gradually move south into early September. If that fails to materialize, we may start hearing complaints from growers. Weak demand has been in the back of traders’ minds since the July release of the low grind data for the second quarter. US tariffs on cocoa exporters threaten to hurt demand even further, but there does seem to see some movement towards exemptions. Indonesia’s top trade negotiator said yesterday that the US has agreed in principle to exempt certain exports, including cocoa from the 19% tariffs, and there shave been indications that Ecuador cocoa exports could be exempted as well. Ecuador is the world’s third-largest cocoa produce.

COFFEE

December Coffee was lower overnight but inside yesterday’s range. The 110-cent, 40% rally since August 1 ran out of steam yesterday despite a major trade house lowering its forecast for Brazil’s 2025/26 arabica crop. Tightening exchange stocks, uncertainty over the effect the 50% tariffs on Brazil, and lowered expectations for Brazil’s crop have lifted the market over the past month. A frost event earlier this summer has also raised questions about 2026/27 production, but the area affected was small and the damage could be very limited in scope. Early assessments amounted to about 1% of 2025/26 production. The dry conditions in Brazil for the past two months may start to worry growers traders if rains do not return in September. The imposition of the tariffs have led to the sharp drawdown in exchange stocks, but Brazilian coffee will have to find a buyer eventually. The 2025/26 arabica harvest is just about complete.

COTTON

December Cotton was slightly lower overnight following a sharp selloff yesterday to its lowest level since August 8. The market has been in a consolidation since April, caught between a smaller US crop and poor export prospects. As of last week, cumulative 2025/26 export sales were the slowest in 10 years. It will be interesting to see if India shows up as a buyer in this week’s update, as the time covered by the report will have been after India had announced it had lowered its tariffs on cotton imports. The 50% US tariff on Indian imports goes into effect this week. This could lower India’s cotton needs if it means a slowdown in textile manufacturing. The US dollar is higher today but is still in the vicinity of 3 ½ year lows, which should help improve US export prospects. US crop conditions remain very good. 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. US Delta crops have dried out greatly resulting in some crop stress. Rain is possible later this week and into the weekend. Last week’s US drought monitor showed 22% of the US cotton crop was in an area experiencing drought as of August 19, up from 5% the previous week, due to an expansion of drought areas Arkansas, Mississippi, and Tennessee. Xinjiang, China crops are rated favorably, although recent mild weather has slowed crop development rates. Milder than usual temperatures may continue for a while. This may push maturation a little behind the usual pace, which could cause problems if there is an early frost.

SUGAR

October Sugar was near unchanged overnight as it continued to consolidate inside a range bound by 17 and 18 cents. Brazil’s national crop agency Conab cut its forecast for 2025/26 sugar production to 44.5 million metric tons from 45.9 million previously, citing hot dry conditions last year during year, including wildfires last September. Center-south production is now forecast at 40.6 million tons, down 2.8% from the April forecast of 41.8 million. Production is still expected to increase by 0.8% form 2024/25. One caveat is that crushers are prioritizing sugar production over making ethanol. 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. Brazil is currently in its dry season

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