March Sugar Extended Rally Overnight

COCOA

December Cocoa was near unchanged overnight after consolidating inside Monday’s range yesterday. The market has been in a consolidation mode since putting in an all-time high in April and then correcting roughly 50% of its gains. The trade is awaiting the arrival of the west African main crop, which officially begins on October 1. So far, grower reports from Ivory Coast suggest the crop has good prospects, with decent soil moisture levels and enough pods on trees of various sizes to generate two harvests per month from October through December. Arrivals this week were the strongest since June and well above year ago levels. Farmers are also reportedly stockpiling their first beans in warehouses while they wait for the new farmgate price, which they hope will be well above the current 1,500 CFA franc ($2.560) per kilogram.

COFFEE

All eyes are seem to be on Brazil, which needs rain to boost the flowering process. The dry conditions this year have stressed trees and raised concerns they will struggle to produce a decent crop, even if rains come on time. World Weather Service does not expect rain of any significant amount to reach the key growing areas into next week. However, there may by some light rain and an increase in humidity that is needed for the rainy season to develop. The head of Colombia’s national growers’ federation said on Tuesday that they expect their nation to produce 13 million bags of coffee this year, up 15% from last year, thanks to varieties that are more resistant to extreme climate conditions and fungus. The last USDA forecast had a projection of 12.4 million bags. There were reports that the EU Deforestation Regulation (EUDR), which will ban the import of commodities linked to deforestation, could be delayed in the next few days. The regulation is due to come into effect in December, and its delay could ease pressure on the part of buyers who were rushing to secure product ahead of the deadline. ICE certified arabica stocks fell 6,034 bags yesterday to 831,727, which is their lowest since September 4.

COTTON

Hurricane Helene looks like it will make landfall as a Category 3 storm along the Florida coastline on Thursday, somewhere between the panhandle and Tampa, with the Big Bend area the most likely location. High winds could damage cotton crops in southern Georgia, and heavy rains across the state could cause some discoloration and stringing of bolls that are open. Additional rain, interruptions to fieldwork, and cotton quality declines could affect a large part of the Delta and the Southeast from Saturday to Monday. As of Sunday, Georgia had 63% of its crop with bolls open and none harvested. The US dollar was weaker at times overnight and was close to taking out last week’s 14-month lows but was back near unchanged this morning. A weak dollar helps improve US export prospects.

SUGAR

March Sugar extended its rally overnight and traded to its highest level since December 5. Brazil’s Unica is expected to release its estimate of Center-South sugar production for the first half of September this week. The last report had production running 6.0% below the same period last year, but cumulative production since the marketing year began in April was still 3.9% above last year. Brazil’s extended drought is expected to pull their production down this year, and the bi-monthly Unica reports have exhibited this tendency since July. The dry weather last winter and early spring got initially boosted production, as it made for ideal harvest conditions, but the extreme heat and lack of moisture seems to be taking its toll on cane yields. World Weather Service expects center south Brazil crop areas to receive very little rain over the next two weeks. There are concerns that next year’s crop will struggle as well due to the extreme dryness. As of September 17 managed money traders were net long 55,000 contracts, which was relatively modest when compared to the 200,000+ from 13 months ago. Prices have increased 3.11 cents since that data was collected, so we suspect the net long has increased considerably since then.

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