Dec Coffee Extended Yesterday’s Recovery Rally

COCOA

December Cocoa is lower this morning following yesterday’s rally, as the market continues to consolidate inside a range and awaits the arrival of the main crop. Ivory Coast port arrivals last week totaled 12,000 metric tons, up from 8,000 the previous week and 5,000 a year ago. Cumulative arrivals since the marketing year began on October 1, 2023 have reached 1.716 million tons, down from 2.314 million at this time last year. However this was the first time they were above 10,000 since August 11. Ivory Coast farmers interviewed by Reuters said that the weather in the main cocoa-growing region is getting sunnier since last week, which is allowing beans to mature in good condition and avoid disease. They said last week rains were below average but that the main crop was developing well, thanks to good soil moisture. They also said more rain and sun will be needed until late October to ensure an abundant, quality harvest. Farmers also said harvest had begun but many were reluctant to sell their first beans at the current farmgate price. They are hoping the price will be hiked from the current 1,500 CFA franks  ($2.54) per kg in early October.

COFFEE

December Coffee extended yesterday’s recovery rally overnight and was approaching last week’s high. A typhoon brought heavy rain and possibly some damage to their arabica crops in northern Vietnam over the weekend, but it missed the Central Highlands, where their main robusta crop is grown. Vietnam is not a big producer of arabica coffee. The Brazilian exporters group Cecafe is expected to release a report today. Dry weather in Minas Gerais this year may have limited the current crop, and at some point the new crop will need rain to spur flowering. ICE arabica stocks increased by 2,840 bags yesterday to 846,684, and the number pending grading increased by 14,710 bags to 58,502.

COTTON

December Cotton traded in a narrow range overnight, as the market did not seem too concerned about the possibility that Hurricane Francine, which is heading towards Louisiana, will cause much damage when it makes landfall tomorrow. The market was pressured late last week by steep selloffs in stocks and crude oil, and recoveries in both those markets lent support to cotton. The weekly Crop Progress report showed 45% of the US cotton crop had bolls open as of Sunday, with Texas 40% open, Mississippi 69%, Louisiana 72%, and Georgia 44%. Heavy rains are expected in Louisiana and Mississippi and could cause damage to crops with open bolls. The progress report also showed 40% of the US crop was rated good/excellent as of September 8, down from 44% the previous week but up from 29% a year ago. The five-year average for this date is 42%. Texas was 29% G/E, down from 36% last week but up from 9% a year ago. The five-year average is 29%. For the USDA supply/ demand report this week, the average trade expectation for US 2024/25 cotton production is 15.31 million bales, with a range of expectations from 14.88 to 16.10 million. This would be up from 15.11 million in the August update. Ending stocks are expected around 4.68 million bales (range 4.10-5.25 million ) versus 4.50 million in August. World production is expected to come in around 114.75 million bales versus 117.64 million in August, and world ending stocks are expected at 77.46 million versus 77.61 million in August .

SUGAR

October Sugar inched lower overnight as it continued its correction from the late August rally. Modest rain forecast for Brazil has weighed on prices, but amounts do not look like they will be enough to relieve drought. Yesterday, Bank of America analysts said they expect prices to remain firm or possibly work higher due to the tight global balance of sugar, saying most projections of the Brazilian crop are too high. They are looking for a small global surplus of 650,000 tons in 2024/25 with a stocks/use ratio of 54.1%. They also said that if India goes ahead with a plan to divert 3-4 million tons of cane to ethanol production, the global supply balance would shift to a deficit of 3 million tons. Central Europe is poised to receive heavy rain in the next ten days that could result in some local flooding and a degradation of spring and summer crops. Typhoon Yagi moved across Hainan, China over the weekend, which may have caused damage to sugarcane crops, but that has not been confirmed.

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