Cocoa Consolidates Amid Crop Uncertainty

COCOA

The cocoa market has seen a sideways coiling trade this week which is justified by fluctuating uncertainty over the size of the incoming Ivory Coast crop which the trade is attempting to quantify by weekly Ivory Coast arrival rates. Therefore, Ivory Coast arrival numbers are likely to impact the Monday trade especially after a very slightly disappointing December 14th arrival tally. In retrospect, the market has found some value at Thursday’s spike low of $5,795 and that is likely the result of the large reduction 41% in 2026 surplus estimates from Citi group earlier this week. However, that surplus reduction may be premature over overstated considering favorable rains in key production areas. Fortunately for the bull camp there are expectations of noted beginning of the year index related buying of cocoa as funds reallocate to markets perceived as cheap and or to those with upside potential.

SUGAR

With a notable gap down trade in New York sugar this morning North American sugar is following/catching up to global sugar price declines. However, March sugar may not find value or become excessively oversold without a trade below $14.07. As in the cotton market, there are analysts predicting a key low in sugar in the coming “months”, but most predictions suggest more significant declines will be seen first. Short of a surprise supply issue, the biggest hope for the bull camp in 2026 is an aggressive shift in sugar crushing in favor of ethanol. The prospects of a tightening of the world sugar market were clearly reduced this week by the USDA projection of an 8.3 million ton increase in global production for the 2025/2026 crop. In our opinion, the need for Indian sugar farmer price support and the likelihood of expanded Indian sugar exports leaves the bear camp with firm control. It should be noted that the 2025 Indian sugar surplus of 2.8 million metric tons totally offset the Indian 2024 deficit leaving India in an exporting posture. Even outside markets are bearish for sugar, with oil markets presented with massive surplus forecasts daily.

COTTON

While cotton prices have bucked the downward trend seen in other soft commodity markets this week, we see the rally as a temporary “bounce”. In fact, the sharp range down failure to new lows for the move on Tuesday saw the highest trading volume since the middle of November with a very minimal increase in open interest which suggests the trade generally remains bearish toward prices. However, the latest COT positioning report update saw a reduction in overall net shorts, but that potential bullish sentiment signal is negated by the fact that cotton prices from that report release date have mounted consistently lower highs and lower lows. In other words, the short speculative position has likely been rebuilt over the past three weeks. Weekly export sales of cotton showed sales of 135,900 running bales for the week ending November 27th, which is down from 148,400 in the previous week. While there are bullish long-term potential arguments from an expected drawdown in cotton inventories over time, a tightening of supply and improvements in demand are absent and the end of the downtrend is not in place yet.

COFFEE

As in many other physical commodities the charts in coffee remain bearish with a very uniform pattern of lower highs and lower lows, yesterday’s downside breakout to the lowest level since mid-September and moderate net longs held by commodity Index and managed Money traders. Adding to the bear case is a Brazilian weather condition labeled as nearly perfect and reports that the Vietnam harvest is at pace. With the lifting of US tariffs on coffee imports demand hope might be improving factored in, but that development coincided with an initial decline in open interest and recent multiple failures of the 200-day moving average (at 346.57 today) which means bearish news dominates over bullish news. Unfortunately for the bull camp sharp declines in prices earlier this week were forged on an uptick in trading volume which suggests the trade does not see March coffee prices below 360 as too cheap to sell.

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