Cotton Falls to New Contract Low

COTTON

March Cotton fell to a new contract low overnight, marking a resumption of the steady downtrend that has been in place since September. Traders may be wondering if the cotton market can make it “three in a row” for strong export sales, but some may have their doubts because of Chinese New Year this week. Last week’s report showed net sales of 428,723 bales (current and new crop combined), which was the highest in a year. The previous week was also strong at 317,568 bales. Today’s data will be as of last Thursday, just ahead of the start of the holiday, so there is a chance we could see another strong week. Crude oil was lower overnight, which adds pressure to cotton prices. With corn prices their highest since May and soybeans well off their mid-January lows, one would think that at some point cotton will have to work higher to bid for acres this spring. World Weather Service said yesterday that rain will be needed during the second half of winter and early spring in the southwestern desert region, southern California and South and West Texas to ensure favorable soil moisture for spring planting. Recent hot and dry weather in eastern Australia has stressed some unirrigated crops. Cotton planting in Mato Grosso, Brazil may have advanced in the past week, but fieldwork is still well behind normal,  and an extended period of dry weather is needed to get cotton planted.

cotton close up

SUGAR

March Sugar’s rally has stalled following its sharp gains from last week’s 22-month lows. The active rainfall in Brazil since November has improved prospects for 2025/26 production to the point where analysts are raising their forecasts. The bi-monthly UNICA report this week showed Brazilian Center-South production fell sharply in the in first half of January, but that is not unusual this time of year. Cane crush and sugar (and ethanol) production tend to drop off this time of year as the arrival of seasonal rains slow harvest and crushing activity. Cane crush for the period was down 64.1% from last year, and sugar production was down 78.2%. However, ethanol production was up 16.4% from a year ago, a move possibly encouraged by low sugar prices. Ethanol ’s share of crushing capacity for the period increased to 79.2% from 66.0% a year ago.

COCOA

March Cocoa is lower this morning, having backed off from its January high yesterday. A bit of bearish news has crept into the market this week, with hints of an end to the dry season in West Africa and a sharp increase in ICE exchange stocks. World Weather Service said yesterday that west Africa could see regular rounds of showers and thunderstorms through the next week along and near the coast. This is not a game changer, as inland areas where most of the cocoa is grown is not expected see much rain. They did point out that seasonal rains usually begin as scattered showers and thunderstorms and that recent activity may be signaling a relatively normal start to the season. Still, there is need for cooler weather and rain soon because of the stress that the hot and dry conditions has induced in recent weeks. Ivory Coast farmers interviewed by Reuters this week did acknowledge a recent improvement in conditions. ICE cocoa certified stocks increased 29,751 bags yesterday to 1.348 million, the highest they have been since January 6. Stocks are up 84,846 in the past three sessions.

March Cocoa failed to push through the January 6 high at 11,882 yesterday, and if it backs off from that level again today, we could see some selling emerge. The market may need a bullish catalyst, such as disappointing rain amounts or a resumption of the decline in exchange stocks, to move back to the contract highs.

COFFEE

March Coffee is higher again this morning, once again reaching contract (and all-time highs). The market made a technical breakout late last week, but it has also found fundamental support from new estimates for Brazil’s 2025 production. Last year’s record heat and drought in Brazil are expected to take a toll on the upcoming crop, and Conab this week put Brazil’s 2025/26 coffee production 4% lower than last 2024/25. Reuters reported yesterday that dealers were saying 70-80% of Brazil’s current arabica harvest had been sold and that activity was quiet. There were also reports that robusta growers in India and Vietnam were holding back sales in anticipation of further price gains.  ICE certified arabica stocks fell 24,655 bags yesterday to 902,995, the lowest since early December. Stocks have fallen 53,214 bags over the past five sessions. However, the number of bags pending review increased by 27,727 bags yesterday to 33,431, the highest since January 3.

 

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