Dec Coffee At New Contract High

COCOA

December Cocoa broke out above a triangle formation this week, which is a bullish technical development. Farmer reports from west Africa have raised expectations for the upcoming crop, but perhaps by too much. Traders may be questioning how much of the three-year global production deficit can be alleviated by just one crop. They may also be acknowledging that it may take some time for production to live up to expectations given the shock from earlier this year. Ivory Coast growers sail this week they expected two harvests per month from October through December. The mains growing areas of West Africa, have been on the dry side for several weeks, and this may be raising questions as to whether the crop will be as strong as hoped. The funds may also be jumping on board after staying out of this market for several months.

COFFEE

December Coffee traded to a new contract high overnight, as traders are becoming increasingly concerned about Brazil’s 2025 crop given the lack of any significant rainfall in the forecast through next week. This year’s dry season in Brazil has been exceptionally dry, and this comes after a low-moisture end to the wet season early this year. The crop needs rain to induce flowering. World Weather Service says some light moisture is possible in the next week, but the precipitation will be sporadic and too light to induce any flowering. Relative humidity may slip lower for a little while, leading to faster drying rates. A boost in humidity is needed to get the wet season rolling, but the trend seems to be moving backwards. Vietnam’s crop has gotten decent rain this year.

COTTON

December Cotton is near unchanged this morning after extending yesterday’s setback overnight. Hurricane Helene is expected to make landfall along the Florida Panhandle as a category 3 or 4 storm around 10 PM tonight. This combined with a low pressure system to the west is expected to bring significant rainfall tonight into Saturday in Florida, the southeastern states, and the northern Delta. Cotton remains most at risk of damage in southern Georgia and northern Florida. The weekly US Export Sales report will be released this morning. Last week’s report showed that for the week ending September 12, the US has sold 106,801 bales for the 2024/25 (current) marketing year and 10,560 for 2025/26 for a total of 117,361. Cumulative sales had reached 44% of the USDA forecast for the 2024/25 marketing year versus a five-year average of 56% for this point in the season. China has set its 2025 import tariff quota for cotton at 5.32 million metric tons (24.4 million bales). So far for the 2024/25 marketing year, China has committed to buying 461,900 bales from the US versus a five-year average of 1.524 million at this point in the season. Last year they imported 4.920 million from the US. Their crop looks strong this year. A new high in the S&P 500 futures and a slightly weaker dollar overnight are supportive to cotton, but this is offset by a sharp break in crude oil.

SUGAR

March Sugar extended its rally overnight to trade to its highest level since December 5. There has been increasing talk that Brazil will enter a one of the longest between-crop periods in decades due to the historic drought this year and the widespread farmland fires. The drought may speed up harvesting for the current crop and lead to a long delay for development for the 2025/26 season. Traders expect mills to end sugar production early, by the end of October. A private analytics firm, CovrigAnalytics is forecasting that the Brazil Center-South will have only 790,00 metric tons of sugar in stocks by the first quarter of 2025. Center South Brazil is expected to see very little rain over the next two weeks. Unica is expected  to release its estimate of Center-South sugar production for the first half of September this week. The last report, for the second half of August, had production running 6.0% below the same period last year, but cumulative production since the marketing year began in April was still 3.9% above a year ago.

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