Cocoa Crop Appears Less Dire

COCOA

A less threatening weather trend in Ivory Coast has made the cocoa mid-crop situation appear less dire. A move below key technical levels early Monday was enough to spark a selloff in September Cocoa to its lowest level since May 29.  Bulls apparently gave up waiting for that “bullish spark.” Growers stress that the crop is not out of the woods yet, but anecdotal comments from farmers in Ivory Coast sound more optimistic about the late stage of the mid-crop and the upcoming main crop now that seasonal rains have arrived. The trade is awaiting results of pod counting surveys, which will come later this summer. Ivory Coast arrivals are still running way behind last year. They totaled 15,000 metric tons for the week ending June 23, down from 25,000 the previous week and 30,000 a year ago. Cumulative arrivals have reached 1.652 million tons, down from 2.027 million a year ago and down 22% from a four-year average of 2.01 million for this point in the season. The Commitments of Traders Report showed managed money traders were net sellers of 735 contracts for the week ending June 18, reducing their net long to 25,675. This is at the lower end of the historic range and is far from overbought.

COFFEE

Dry weather in Brazil and doubts about Vietnam’s crop are keeping a bid under the coffee market. Some farmers in Vietnam say the rains have arrived too late to help the crop. The drought this year has been described as the worst in a decade. Last week the Mercantile Exchange of Vietnam forecast a 10-15% decline in coffee output this year because of the extreme heat that Central Highlands experienced between March and early May. Warm and dry weather are forecast for July and August, which does not bode well for production either. There are reports of shipping delays in Brazil limiting the flow of robusta beans. The dry conditions there can also increase the crop’s vulnerability to frost. ICE stocks increased by 3,489 bags yesterday to 835,444. Stocks are up 50,673 since the end of May. The Commitments of Traders Report showed managed money traders were net sellers of 1,005 contracts of coffee for the week ending June 18, reducing their net long to 60,645. This is still in the upper reaches of the historic range, which leaves the market vulnerable long liquidation if sellers get active. The record net long is 71,811, which was set in April.

COTTON

The Crop Progress report late yesterday showed the US cotton crop improved last week, yet the market was slightly higher overnight and came close to taking out yesterday’s two-week high. The report showed 56% of the US cotton crop was rated good/excellent as of Sunday, up from 54% last week and 49% a year ago, which is also the 10-year average. Texas was rated 49% good/excellent versus 43% last week and 36% on average. Georgia was 59% good/excellent, unchanged from last week and compared to average of 64%. 30% of the crop was squaring as of Sunday versus 25% a year ago and 28% on average. For Friday’s USDA acreage report, a Reuters poll has an average trade expectation of 10.829 million acres planted (range 10.5-11.2 million). This would be up from 10.673 million in the March intentions report and 10.23 million in 2023. The 6-10 and 8-14-day forecasts have much above normal temperatures in the southeastern US and the Delta and above normal in west Texas. After some rainfall this week, a below-normal trend develops in the southeast and Delta over the next two weeks. However, the western and southern parts of Texas and the Coastal Bend stay normal to above normal. The Commitments of Traders Report showed managed money traders were net sellers of 8,284 contracts of cotton for the week ending June 18, increasing their net short to 44,019. This is approaching the record net short of 47,428 from August 2019. The market put in a low the day after this data was collected, and short covering likely accelerated the rally.

SUGAR

Dry weather in Brazil’s key cane producing region, a disappointing start to the Indian monsoon, and now weather problems in Europe have helped lift sugar off its May low. The EU crop monitoring service Mars has lowered its sugar beet yield forecast to 74.4 metric tons per hectare from 75.4 in their May forecast. Western Europe has experienced excessive rains, and the southeastern Europe and the Black Sea region have been suffering under extreme heat and drought. EU is the world’s third largest sugar producer after Brazil and India, and Russia is the eighth largest. Dry conditions are expected to continue in Center-South Brazil, and which could lower yields as the harvest proceeds. An executive with sugar producer Tereos said the company expects to crush about the same amount of sugarcane in Brazil during the 2024/25 harvest as it did last year, despite the drought, but they will do so by retaining all of their cane production instead of selling off part of it, and they will also not leave raw cane in the fields. India’s monsoon has started to advance again after stalling for a week or so and is expected to bring good rains into early July. A long range forecast calls for warm and dry weather in Thailand in July and August, which does not bode well for their sugar production. The Commitments of Traders Report showed managed money traders were net buyers of 16,608 contracts of sugar for the week ending June 18, reducing their net short to 20,717. This is a modest net short when compared to the net short of 213,000 contracts these traders held in 2019, and it does not pose much of a short-covering threat.

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