May Coffee Futures Sharply Higher

COFFEE

May Coffee was sharply higher on more concerns about Brazil’s ability to meet global demand. The nearby (December) contract, which goes off the board on the 18^th, reached 335.00, just short of the all-time high of 337.50 from April 1977. Brazilian coffee traders Atlantica and Cafebras said they will negotiate with their creditors in court, citing debt issues stemming from poor crops and currency issues. There are reports that they are owed 900,000 bags from farmers who are yet to make good on delivery pledges. Traders worry that similar problems could be affecting other who are caught short as well with growers reluctant to sell. Traders estimate Brazil farmers have sold 70% of their current crop and stay they are not interested in selling any more at this point, especially with the uncertainty of the upcoming crop. Brazilian federal auditors have begun a nationwide strike over pay, which has raised new concerns about logistical problems for agricultural products. The Brazilian real was down sharply yesterday, falling to its lowest level since May 2020 for the nearby contract, which was the all-time low. The weaker currency would typically encourage producers to sell, as it would allow them to benefit from the relatively stronger dollar. The trade is still talking about the slow start to the Vietnam harvest. January London coffee traded to a new contract high overnight, led by arabica prices. March NY Coffee was sharply higher overnight and reached a new contract high, but is it well off that level as we come into the trade this morning.

COCOA

March Cocoa is higher this morning after finally breaking out above last Friday’s high after several attempts this week. On the nearby chart, the market is attempting to break above a downtrend drawn off the all-time highs from April and subsequent highs in September and last week and is close to doing so today. The trade is concerned that this year’s West African main crop, which looks much better than last year, will not be enough to overcome the tight supply situation brought on by three successive global supply deficits. The arrival of the dry season has suggested to some that the crop will not be as strong as hoped.  Report this week that Ghana’s cocoa regulator, Cocobod, has as much as 350,000 metric tons of deferred obligations that it has to fill with this year’s crop suggests supplies will  remain tight. The dry season appears to have arrived in West Africa, which is seasonal but nonetheless keeps production worries alive.

COTTON

March Cotton is slightly higher this morning on a delayed start, as the market awaits the export sales report.  It may need a strong report to continue to build on the rally of the past couple of weeks. Last week’s report showed net sales of 318,516 bales for the 2024/25 for the week ending November 14, the largest so far for the marketing year. Adding new crop sales of 16,016 brought the total to 334,532, which was the largest since June. Cumulative sales for 2024/25 had totaled 6.792 million bales, the lowest since 2015/16. Sales to China have only reached 623,200 bales versus 2.903 million a year ago. Pakistan has been the biggest buyer so far this year at 1.349 million bales, followed by Vietnam at 1.066 million. China has also had a strong crop, which reduces their import needs. The possibility of strong tariffs in the upcoming  year has US agricultural exporters on edge.

 SUGAR

March Sugar is lower this morning despite news over the past two days that have reinforced expectations for a smaller Brazilian crop this year. It is possible that yesterday’s decline in the Brazilian real to historic lows has traders expecting sugar producers more anxious to sell. Yesterday, the Brazilian agricultural agency Conab lowered its forecast for Brazilian 2024/25 sugar production at 44 million metric tons from a previous forecast of 46 million. Center-south production was lowered to 40.31 million from 42.06 million previously forecast. Sugarcane-based ethanol production is seen at 28.85 billion liters versus 28.47 previously. On Wednesday, the bi-monthly UNICA report on Brazilian Center-South Sugar Production for the first half of November came in at 898,000 metric tons, down from 1.784 million in the second half of October and down 59% from a year ago. Cumulative production for the 2024/25 marketing year has reached 38.274 million tons, down 3% from a year ago. This is the first time this year cumulative production has fallen below year-ago levels this season. Cane crush came in at 16.360 million tons, down 53% from the same period last year. Cumulative crush has reached 595.971 million tons, down 2.2% from last year. Crushers have switched more of their crushing operations to ethanol and away from sugar.

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