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USDA Verifies Tight Global Supply


March coffee recovered slightly overnight after yesterday’s steep selloff from 8-month highs. Reports of significant commercial selling eroded support yesterday and likely fueled a wave of long liquidation ahead of the holidays. The USDA released its latest forecast for the global coffee supply/demand balance late yesterday in which they revised 2023/24 production lower from their June estimate and showed the tightest ending stocks in 12 years. This was not exactly a surprise given the lower trends in Robusta production this year, but it may have lent some support overnight.

Coffee bean sacks


March cocoa set back slightly overnight after trading to another new contract high yesterday. Tight global supplies and low production out of key producers in west Africa have kept the long-term uptrend intact, and buyers have come in on the slightest of setbacks. The longest setback the market has endured since the new marketing year began has been four days. The start of the dry season in west Africa means that production will start a seasonal drop-off, which will only add to the tight supply situation.


March cotton is barely holding onto its modest uptrend off the post-harvest low from November. US supplies are tight after a poor crop this year, but global supplies are less so, as Brazil offers strong competition. Traders have argued that shipping bottlenecks in Brazil’s ports are preventing that nation from exporting more cotton right now. The improvement in weekly export shipments in recent weeks supports that idea, even if US export sales have dropped off. Last week’s export sales report showed net sales of 71,405 bales of cotton (current and next crop combined) for the week ending December 7, which was the lowest since October 5 and the first time they were below 100,000 since October 12.


March sugar extended its move lower overnight to trade to its lowest level since March 29. The market fell through long-term retracement support, which added to the selling pressure ahead of the holidays. StoneX forecast Brazil’s first quarter 2024 sugar exports at 7.6 million tonnes, up from 4.2 million from the same period last year. Brazilian Center-South sugar production is course for posting a record in 2023/24, and this continues to pressure the market despite concerns about production in India and Thailand. A selloff in the Brazilian real yesterday may also encourage that nation’s producers to aggressively market their sugar for export.


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