Coffee Rises on Brazil Harvest Delays

COFFEE

September Coffee saw a significant rally in June and early July off concerns about the Brazilian arabica crop, currently in harvest, that saw delay and possible damage from heavy rains in June. Conditions have improved in recent weeks, allowing harvest to advance, but it is still behind. In the meantime, old crop stocks continue to decline. ICE certified arabica stocks fell 1,111 bags on Tuesday to 328,759, their lowest since February 23, 2024. Potential rains in coffee areas this week and into the weekend threaten to cause further delays. World Weather Inc. sees a chance for rain in Parana today, spreading northward through Sao Paulo on Thursday and Friday and dissipating in Sul de Minas Saturday.

COTTON

December Cotton was slightly higher early Wednesday following a strong close on Tuesday that took the market to its highest level since the selloff that came last Thursday on a dismal export sales report. The market may be seeing some support by higher crude oil prices, but this is limited by a slightly weaker stock market and a firmer dollar. China announced last week that it would begin selling part of its cotton reserves starting July 20 to meet demand from domestic mills, and so far the sales have appeared to be selling out. This is viewed as an indicator of strong demand, keeping in mind that China has not been a big buyer of US cotton this year.

SUGAR

October Sugar was lower early Wednesday but was inside the range of the previous two sessions. News this week from Brazil’s Agriculture Ministry that center-south sugar production was down 44% from the same period last year was blamed on too much rain during the period and was likely lower than expected. Brazil’ sugar production is expected to be lower this year because of a greater emphasis on ethanol. El Nino is producing an erratic monsoon in India and drier conditions for Thailand, which could affect those nations’ output as well. Europe’s beet crop is suffering from  a severe drought.

COCOA

September Cocoa was lower early Wednesday but inside Tuesday’s range. A Reuters survey of analysts earlier this week had an average expectation calling for a balanced market in 2026/27 after a 400,000 metric ton surplus this year due to El Nino. World Weather Inc. says rain will be erratic and light at times from Ivory Coast to Cameroon and Nigeria during the next week, but showers and thunderstorms will develop in parts of the region each day. All areas will receive at least some rain that will be beneficial. They stressed the need to keep close watch on rainfall in August and September, as by that time El Nino’s influence on Africa could be much greater and there may be a delay in the return of seasonal rain and/or the rainfall may be lighter than usual. Indonesia is aiming to replant 2,000 hectares acres of cocoa plantations this year and 5,000 next year in an effort to reverse their shrinking production. Their production has been in steady decline over the past decade due to aging trees and lack of investment. Indonesia aims to produce 500,000 tons by 2028 versus the roughly 200,000 tons in recent years. By comparison, Ivory Coast is expected to produce around 1.98 million tons this season, with Ghana at 675,000 and Ecuador 600,000.

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