Demand Worries to Pressure Sugar Market?

SUGAR

July Sugar is near unchanged this morning but not too far above Wednesday’s low. China increased its tariffs on US imports to 125% overnight in the latest escalation, but so far that does not appear to have spooked the markets. However, the dollar was sharply lower overnight, with the Dollar Index falling to its lowest level since March 2022. This could support the Brazilian real, which would lower the incentive for Brazilian producers to sell, but the magnitude of the decline in the dollar is also unsettling to markets in general. Yesterday’s monthly USDA supply/demand report put US 2024/25 sugar supply at 14.461 million short tons, up from 14.317 million in last month’s report. US production was lowered by 41,000 tons, mostly due to a 39,000-ton decline for Florida, but that was more than offset by at 181,000-ton increase in high-tier tariff imports. Total use was left unchanged, which increased ending stocks to 2.016 million tons, up 144,000 from 1.872 million in last month’s report. The stocks/use ratio is 16.2%, up from 15.0% last month but down from 16.6% for 2023/24.The increase in US imports does indicate the US will pull more supply from the world market.

Lower demand expectations off global economic uncertainty may be enough to pressure the sugar market, despite lingering uncertainty off Brazilian output. The next update from UNICA, covering the second half of March, is expected next week.

COTTON

July Cotton is slightly higher this morning after a mild selloff from a slightly bearish USDA supply/demand report and a slight improvement in US exports last week. The weekly US Drought Monitor showed approximately 21% of US cotton production was in an area experiencing drought as of April 8, down from 34% the previous week and 38% on March 4. The map showed areas in West Texas and the Panhandle improving from “moderate drought” to “abnormally dry,” which eases concerns about planting conditions. Heavy rains and flooding in the Delta and Southeast may slow plantings, but on the whole, the moisture is welcome. The market fell to new contract lows last week in the wake of the tariff announcement, particularly because Vietnam faced one of the heaviest tariffs and they are the biggest buyer of US cotton so far this year. The 90-day postponement offered some relief, as did Vietnam’s apparent willingness to negotiate for a reduction in their tariff, but so did the fact that prices had fallen their lowest level in over four years right into planting season. The escalation of tariffs between China and the US is not as impactful because China has already slowed their purchases of US cotton over the past couple of years.

COCOA

July Cocoa is higher this morning but inside yesterday’s range. The market fell yesterday after chocolate maker Barry Callebaut reported a 4.7% decline in sales volume for the first six months of their financial year (September-February), blaming high prices for the decline. This is tangible evidence that high prices are hurting demand. First quarter grind statistics for Europe, Asia, and North America are due to be released next Thursday. Ivory Coast’s Agriculture Minister said overnight that his nation could take measures to make cocoa more expensive if the tariffs proposed by the Trump administration go into effect. Ivory Coast is facing a 21% tariffs, one of the highest in West Africa. It was not immediately clear what specific measures the minister was referring to. World Weather Service said recent rains in Nigeria and Cameroon should improve topsoil moisture, but that Ivory Coast failed to get enough to support crops without frequent additional rains. An erratic pattern is expected to dominate from Ivory Coast to Cameroon and Nigeria over the next 7-10 days. ICE certified stocks increased 10,646 bags yesterday to 1.879 million, the highest since October 24.

COFFEE

July Coffee reversed higher on Wednesday and Thursday after falling to its lowest level since January 22 this week, but it settled well off its highs yesterday and is near unchanged overnight. The market saw severe technical damage this week when it broke below a two month consolidation, but the price decline was apparently a case of a market falling too far, too fast. The market drew some support yesterday from a Cecafe report that Brazilian green coffee exports fell to 2.95 million bags in March, down 26.5% from a year ago. The trade is expecting lower Brazilian production this year due to the extended drought last year, the fact that this is the off-year in their biennial production cycle, and disappointing rainfall totals over the past few months. World Weather Service said Brazil rainfall saw some increased rainfall across Sul de Minas and Cerrado Mineiro this week that could support some short term topsoil moisture improvement in some areas and more frequent and significant rainfall is expected next week. ICE certified stocks increased by 7,371 bags yesterday to 755,559.

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