Rains To Improve April-Sept Crop Yield

COCOA

March Cocoa edged lower overnight and traded to its lowest level since January 17. Ivory Coast farmers told Reuters yesterday that light rains fell last week in most of the nation’s growing areas, and they said this will strengthen trees and improve the yield of the April-September mid-crop, but they also said a good rainfall is needed for the crop to develop well. This is quite a turnaround from the comments last week that were all doom and gloom. World Weather Service said thunderstorms in a part of southern Ghana late last week advanced into southern Ivory Coast over the weekend, bringing a little relief from hot, dry, weather that has otherwise been prevailing in West Africa for weeks. They also said much more rain is needed. An official at Ivory Coast’s cocoa regulator, the Coffee and Cocoa Council, said yesterday that the increase in cocoa arrivals last week was the result of new efforts to end bean smuggling. Two weeks ago the government disbanded a previous security unit in charge of leading the fight against cocoa smuggling and entrusted the responsibility to the army. ICE cocoa certified stocks increased 28,177 bags yesterday after falling 29,582 over the previous three sessions.

COFFEE

March Coffee is lower this morning following yesterday’s move to a new all-time high, but so far the market has stayed inside yesterday’s range. There have been reports of Brazilian farmers being reluctant to sell despite higher prices because of the uncertainty with the upcoming crop. These ideas were supported by a report from Safras & Mercado last week that forward sales of the 2025/26 Brazilian crop were about 12% of the expected output versus 19% at this time last year. The market was also supported yesterday by a sharp drop in ICE exchange stocks on Friday. Stocks fell another 3,285 bags yesterday to 925,650, the lowest since December 11, and they have fallen 56,272 bags in the past five sessions. Also concerning is the small amount of coffee pending review at the exchange, currently only 13,499 bags versus 109,000 in mid-December. World Weather Service reports that rainfall was more limited late last week and early this past weekend than earlier last week, but more fell Sunday night and Monday. Despite the rains, the trade is questioning whether Brazil’s coffee trees have enough energy to produce a strong crop in the wake of the drought and extreme heat in 2024. Earlier this season, crop tours suggested that cherry development was poor despite strong branch growth. Some traders have told Reuters that recent tours showed the crop looking better than expected rains.

COTTON

March Cotton extended yesterday’s decline overnight but so far it has held last week’s low. The strong export sales report last week was good for a one-day rally, but the market once again backed off from its highs, as traders were not convinced there would be enough demand for US cotton to support a sustained move. It is also possible that the improvement in export sales the past three weeks was driven in part by the approach of the Lunar New Year holiday. It did not help cotton’s case that the stock market and crude oil both saw steep declines yesterday. The recovery off yesterday’s lows in the stock market may provide some support today. The pattern of the past couple of months has been for cotton to see a brief rally off a bullish story, like a spike in export sales or a drop in USDA’s forecasts for 2024/25 production, only to see the market resume its downtrend and make a new contract low.

SUGAR

The Brazilian trade group UNICA will release its bimonthly update on Center South sugar production for the first half of January today. The last report, for the second half of December, showed production at 63,517 metric tons, down from 380,000 in the first half of the month and down 73% from a year ago. Cumulative production for the 2024/25 (April-March) marketing year down 5.4% from 2023/24. Brazilian production typically falls off this time of year as the rainy season takes hold, with it resuming late in the first quarter (or early in the second) as conditions dry out and crushers are able to process leftover mature cane from the previous season. The rains in Brazil over the past couple of months have improved the prospects for 2025/26 production. March Sugar saw choppy, narrow action overnight inside yesterday’s range after trading to its highest level since January 76 yesterday. At yesterday’s high, the market had gained 2.01 cents (11%) in just four sessions. This followed a move last week to its lowest level in almost two years. The sugar market had been pressured by prospects of increased supply after the Indian government decided to allow exports for the first time in a year, but the winter storm in the US last week has sparked concerns about the cane crops in the southeast. The US is not a big exporter of sugar, but lower production would leave open the possibility that US import quotas would be increased, therefore pulling supply off the global market. It may take some time to determine the damage.

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