Early Harvest Sparks Sugar Selloff

SUGAR

March Sugar was near unchanged early Wednesday following a selloff on Tuesday that took it to its lowest level since September 22. A large net long position held by the funds has left the market vulnerable to heavy selling is support levels are taken out. The news from India’s National Federation of Cooperative Sugar Factories reported a 745% increase in production this year over last year likely induced the selloff, but keep in mind that the increase was because they started harvest early in the key producing state of Maharashtra. India’s production totaled 845,000 metric tons in October, up from 100,000 for the same period last year. Maharashtra, the leading sugar-producing state, produced 720,000 tons versus none for the same period last year. Maharashtra started their harvest early this year in order to ease tight supplies ahead of festival season, but there have been concerns that this will lead to lower production overall if it means they are harvesting before the cane too early. Brazil production is still a down significantly from last year, and the rains this week will likely keep it down. The recent COT report showed funds holding a near-record net long as of last Tuesday.

COFFEE

December Coffee broke below last week’s lower early Wednesday to its lowest level since September 28 on an apparent resumption of the selloff from the October highs. The Brazilian real was slightly higher early Wednesday but was still sharply lower from where it was a couple of weeks ago. The weak currency and what is expected to be a record crop out of Brazil are putting a bearish light on the market this week, despite persistently low exchange stocks. ICE certified arabica stocks fell 538 bags on Tuesday to 220,379, their lowest levels since September 15 (when they reached a 26-year low). However, the amount pending review has reached 55,396 bags, the highest since September 15. Dry conditions in Brazil this week are expected to be followed by more favorably conditions next week. World Weather Inc. said Brazil rains have been erratic, with many areas expecting dry or net drying conditions. Showers and thunderstorms are to will begin to increase again Thursday and become widespread over the weekend into early next week. Sufficient moisture will fall to maintain a favorable cherry development environment with temperatures holding in a seasonably warm range.

COCOA

December Cocoa was slightly lower early Wednesday after slipping below Tuesday’s low to its lowest level since October 1. The market may be pressured by indications of ample old crop supply and perhaps a less fearful weather pattern despite the threat posed by the super El Nino. World Weather Inc. said erratic showers and thunderstorms will continue to impact west-central Africa cocoa production areas through the next week. The end of the rainy season is approaching. ICE cocoa stocks fell 3,082 bags on Tuesday to 3.699 million bags after reaching their highest level since May 23, 2024 on Monday.  These large stocks suggest ample supply. The Ecuadoran government has warned that El Nino could significantly reduce the nation’s cocoa output in 2026/27. Some 3.1 million hectares are at medium to high risk of rainfall and landslides across the country, and some 500,000 hectares mostly near the coast where cocoa plantations are concentrated face threats of severe flooding. Analysts expecting 10% decrease in output. During the 1997-98 El Niño, cocoa output fell more than 61%, but better management has left cocoa trees in better condition to weather storms. Ghanaian cocoa farmers told Reuters they are hoping for a recovery in their March harvests after a poor start to the season that was caused by a combination of heavy rains in some areas and drought in others. They also said fertilizer was distributed later than usual, with farmers yet to receive it. Fertilizers are is usually applied between March and May, but some said they did not arrive until August. The Ghana Cooperative Cocoa Farmers and Marketing Association said it was too early to predict whether harvests would improve by March.

COTTON

December Cotton reversed higher early Wednesday on what appear to be a rejection of the move to four-month lows. The Dollar Index fell to its lowest level since September 30, which supports cotton on ideas it improves US export prospects. It is also possible that the strong wins for the Democrats has raised hopes Trump’s tariff war would end and perhaps open up export opportunities for US agricultural products. World Weather Inc. said recent rain in West Texas and southwestern Oklahoma delayed harvesting and induced some yellowing of the crop. The Delta crops were impacted by some weekend rain and more this week is could be causing some disruption to fieldwork.

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