Export Prospects Hurt by Dollar Rally

COTTON

March Cotton is slightly lower this morning after yesterday’s rally to its highest level in a week. The weekly export sales report came in strong yesterday, which lent support, but the market may not have much room to rally if low prices are what are driving sales, especially with the US Dollar Index reaching its highest level since November 2022 this morning. World Weather Service reports that Queensland, Australia has seen a notable improvement in dryland field conditions this week. Some drier weather is now expected for a while, but that should lead to aggressive planting and favorable crop development. Rain will resume later in December probably in weeks two and three. It doesn’t help that European purchasing manager indices were weak overnight, as that points to lower demand overall.

COCOA

March Cocoa traded to a new contract high overnight, as the idea that West African production will not be as strong as previously hoped continued take hold. The region appears to have moved into its dry season, which could be a mixed bag, as it lowers disease prospects but may also limit output yields next month. Farmers had previously expressed optimism that they would have two good crops per month between October and December. Earlier this week it was reported that cocoa consultancies TRS and CRA had dropped their surplus forecasts for 2024/25 due to adverse weather in West Africa and Ecuador. Heavy rains in October raised concerns about pod damage and disease, which may not show up until late this month or December. Ivory Coast arrivals since the marketing year began have reached 549,000 metric tons, up from 417,000 a year ago but below the five-year average of 568,200. World Weather Service says West Africa rainfall will be limited to areas near to the coast, which is normal for this time of year. This will be good for maturation and harvesting. The region has seen no rain in the last 24 yours. Seasonal rains typically return in February.

COFFEE

March Coffee reached a new contract high yesterday and was back within that vicinity this morning. Reports this week that Brazilian farmers have already sold much of their crop suggests they are in a strong position. The USDA attaché in Brazil this week put Brazilian 2024/25 coffee output at 66.4 million bags, down from the official USDA estimate of 69.9 million from earlier this year and only slightly higher than the 66.3 million estimated for 2023/24. Arabica production was estimated at 45.4 million, down from the official estimate of 48.2 million but up from 44.9 million last year, and robusta production was estimated at 21.0 million bags, down from 21.7 million previously and down from 21.4 million last year. Drought and high temperatures earlier this year have pulled production lower than previously forecast and lowered expectations for 2025/26 production as well. 2025/06 will be an “off year” for the Brazil’s arabica production. Robusta prices have firmed this week, with Vietnam domestic quoted at 115-115.5 dong per bag today versus 113.5-114 a week ago. World Weather Service said Brazil coffee production areas will receive a good balance of rain and sunshine during the next ten days, but some drier biases may show up in week two. Sumatra and Java, Indonesia have seen significant rainfall recently, bolstering soil moisture after weeks of poor precipitation earlier this year. The change may be in time to improve many crops that were stressed in dryness previously.

SUGAR

March Sugar is near unchanged this morning after falling to its lowest level in a week yesterday. The market remains in a down-trending channel after backing off from the upper end of that pattern this week. World Weather Service reports that Brazilian sugarcane production areas will receive a good balance between rain and sunshine during the next ten days, but some drier biases may show up in week two. In their semi-annual update on the global market, USDA put world sugar production for 2024/25 at 186.6 million metric tons, up 595,000 from their previous forecast in May and up 2.8 million from 2023/24. World ending stocks at 45.4 million tons were up 7.1 million from the May estimate but down 2.9 million from 2023/24. Brazilian production is estimated at 43 million tons, down 2.5 million from last year but still the second highest on record. Indian production is estimated at 35.5 million, up 1.5 million from last year. Thailand’s production is estimated at 10.2 million, up 16% from last year. Earlier this week, the International Sugar Organization reduced it its projected global supply deficit for 2024/25 to 2.51 million metric tons from 3.58 million in a previous forecast. They also changed the 2023/24 setup from a modest a deficit of 200,000 tons to a surplus of 1.31 million.

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