Demand Optimism in Coffee

COFFEE

July NY Coffee traded right to round-number resistance at 400.00 overnight, and a move above there would leave it within striking distance of the contract high of 408.20 from February. Nestle said yesterday that price increases in coffee and cocoa-related categories had been implemented with “limited customer disruption,” which suggests that demand has not been damaged as much by high prices as previously thought. There is certainly a mix of opinions on Brazil’s upcoming crop. Hedgepoint said it expects Brazil’s 2025/26 coffee crop to reach 63.8 million bags, up 0.6% from last year, but earlier this week Rabobank put production at 62.8 million bags, down 6.4% from last year and down from a forecast by Safras & Mercado last week calling for 65-66 million. The US National Coffee Association has applied for exemptions from the tariffs for coffee imports into the US. The market has already recovered all of its losses from the tariff announcements earlier this month. Recent rains in Brazil have eased the worst fears about their upcoming crop, but they are approaching the end of their rainy season. World Weather Service expects two waves of rain to pass through Brazil’s key coffee production areas through early next week that may represent the end of this year’s monsoon. ICE certified stocks increased 4,110 bags yesterday to 815,926, their highest since February 17.

COCOA

July Cocoa is higher this morning and back near the 100-day moving average after backing off from it on Wednesday. The market has drawn support this week from better than expected grind numbers that have suggested that demand was not a badly affected  by high prices as feared, but it is also paying attention to the prospects for the Ivory Coast mid-crop, which should start arriving in full force next month. World Weather Service said that showers and thunderstorms should impact all of West Africa cocoa areas at one time or another during the next week. Much of the region will see multiple rounds of rain with daily rainfall varying greatly with some areas getting only sporadic and light amounts and others moderate to locally heavy rain. Warmer than usual temperatures will keep evaporation rates high. ICE certified stocks increased by 13,858 bags yesterday to 1.940 million, their highest since October 17. Stocks have increased in 48,591 bags in the past week.

COTTON

July Cotton extended this week’s rally slightly overnight and traded to its highest level since February 18. The market has drawn support from a recovery in the stock market this week and from some optimism regarding demand on what appeared to be a potential thawing in US/China relations, though that situation remains in flux. A spokesman for China’s commerce ministry said on yesterday that if the US “truly” wanted to solve the trade issue, it would lift all unilateral measures against China. Stock index futures appear to be headed toward a lower open, which could pressure cotton if aggressive selling takes hold. The US export sales report yesterday was not very impressive, but the market managed to hold most of this week’s gains. The report showed US cotton sales for the week ending April 17 at 104,005 bales for the 2024/25 (current) marketing year and 38,000 for 2025/26 for a total of 142,005. This was down from 267,879 the previous week and below the four-week average of 178,226. Shipments totaled 292,153 bales, the lowest since February 20 but still at a decent pace. Sales have reached 106% of the USDA forecast versus a five-year average of 105% for this point in the marketing year, which suggests the USDA will not be lowering their forecast in next month’s update. The largest buyer this week was Vietnam at 38,584 bales, followed by India at 22,452, Pakistan at 16,513, and Peru at 16,121. China cancelled 5,279 bales. West Texas planting prospects are improving. World Weather Service expects frequent rainfall over the next three weeks that will ensure adequate moisture for planting. Overly wet conditions in the Delta should limit planting progress there.

SUGAR

July Sugar is near unchanged this morning and is holding inside sideways pattern of the past five days. The market received some supportive news this week from comments by a member of the Indian Sugar & Bio-Energy Manufacturers Association (ISMA) that his nation is likely to export only 600,000-700,000 metric tons of sugar in 2024/25 (ending September), short of a government quota of 1 million tons. This more or less confirmed previous reports. The USDA attaché this week forecast Brazil’s 2025/26 sugar production at 44.7 million metric tons, up from 43.7 million for 2024/25 and 41.0 million in 2023/24. This year’s harvest will start out slower than last year because last year there was an exceptional amount of the previous year’s cane left in the fields to be crushed at the beginning of the season. The crop faced challenging weather conditions in 2024, but increased planted area and better agricultural yields (cane tons per hectare) and better industrial yields (sugar per ton of cane) are expected. The US imported an estimated 1.029 million tons of Brazilian sugar in 2024/25, out of 35.114 million that Brazil exported globally. China was the largest importer of Brazilian sugar at 3.025 million tons.

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