Sugar Holds Up Against Crude Selloff

SUGAR

May Sugar was lower overnight, under some pressure from the risk off mood that has developed in the wake of the tariff announcements this week. So far the market has held up surprisingly well in the face of a steep selloff in crude oil, as that lowers the incentive to for cane growers in Brazil and India to crush for ethanol. The fact that the ethanol demand in both of those countries is tied to government incentives/mandates probably has something to do with that. Sugar imports into the US are already highly regulated, so the new tariffs could have a smaller impact on global supply flows. On the other hand, the steep selloff in equities, fears of a global recession, and a general risk off mood are negative factors that could induce selling. The market did receive some supportive news this week when the Brazilian producers’ group Orplana put the nation’s center-south 2025/26 sugarcane crop at 605 to 618 million metric tons, down from the 630-640 expected for 2024/25. The recent UNICA report cumulative center south cane crush for 2024/25 at 617 tons as of March 15. The marketing year ends on March 31.

COTTON

May Cotton was sharply lower for the second straight session overnight, as the market reels from the tariff announcements on Wednesday that hit some of the biggest buyers of US cotton the hardest. Worries that the tariffs will bring on a global recession is negative for cotton as well. The largest buyer of US cotton, Vietnam, faces one of the largest reciprocal tariff rates at 47%. The other major US  buyers are also facing substantial tariffs, with Pakistan at 29%, China 34%, Bangladesh 37%, and India 26%. Turkey got off relatively easy at only 10%, and Mexico did not see an increase in this round. Last year Brazilian cotton exports surpassed the US for the first time in more than a century, and these tariffs won’t help the US regain customers. Yesterday’s export sales report showed US cotton sales for the week ending March 27 at 169,054 bales, up from 126,029 the previous week but the third lowest since January 2. Sales have been below 170,000 bales for the past three weeks after having several weeks well above 200,000. The largest buyer was Vietnam at 88,551 bales, followed by Turkey at 25,004, Mexico at 22,947, and Pakistan at 21,018. China cancelled 21,347. Vietnam has the most commitments for 2024/25 at 2.334 million bales, followed by Pakistan at 2.208 million, Turkey at 1.504 million, and China at 707,000. Cotton also saw pressure yesterday from a collapse in crude oil, which is used to make polyester.

COFFEE

May Coffee has for the most part held steady in the face of the new tariffs and a heavy selloffs in equities and crude oil. The tariffs announced on Wednesday included 46% on Vietnam, the world’s second largest coffee producer, as well as a 32% duty on imports from Indonesia, the fourth largest grower. Central and South American coffee growers, such as Brazil and Colombia, got the minimum 10% tariff. Vietnam is the third largest supplier of coffee to the US, and that is mainly robusta, which is used to make instant coffee and ready-to-drink cold beverages. Supporting the market is a strong Brazilian real, which lowers the incentive for Brazilian producers to sell for export. The nearby real reached its highest level since October 15 yesterday.  The  market also received some bullish supply news yesterday, with one consultancy putting Brazil’s 2025/26 coffee crop at 64.5 million bags, down from a forecast of 65.6 million bags in November. Arabica production was lowered to 38.7 million bags from 40 million, and robusta was increased to 25.8 million bags from 25.6 million. This is in contrast to some ostensibly bearish forecasts recently. Last Friday, the Brazilian co-op Cooxupe said they expect to receive 6.1 million bags from farmers in 2025 versus 5.6 million in their previous forecast, and earlier this week another firm put the 2025/26 crop at 63.4-69.4 million bags versus a previous forecast of 64 million. The market is trying to determine just how badly the crop was affected by last year’s historic drought, as well as the current dry conditions. A decent pattern of rain intervened in in late 2024. Brazil’s growing regions have gotten some rain recently, but not enough to ease concerns. World Weather Service said that the production region still needs a general soaking to replenish deep subsoil moisture prior to the start of the dry season later this month. ICE certified stocks increased 4,850 bags yesterday to 782,113. This was up 4,296 from a week prior.

COCOA

May Cocoa was lower overnight but still in the upper end of the week’s range after reaching its highest level since February 21 yesterday. The fact that prices had already fallen 37% from their high in December may have immunized the market from panic-selling off the tariff news. In this week’s tariff announcements, major cocoa producers were hit with the following tariffs: Ivory Coast 21%, Ghana 10%, Ecuador 10%, Nigeria 14%, and Cameroon 12%. These were for the most part at the low end of the range (10% is the minimum). The cocoa market is being supported by expectations for a poor Ivory Coast mid-crop, with recent estimates -40% from last year after an overly-dry “dry” season. Recent rains have eased those concerns. World Weather Service says beneficial rains should reach much of West Africa next week, with Nigeria and Cameroon seeing their chances improve as the week progresses. The southern half of Ivory Coast and west central Ghana received light to moderate rain over the last 24 hours with some locally heavy amounts. ICE certified stocks increased  yesterday by 10,686 bags to 1.863 million, their highest since October 22. Stocks have increased in 19 of the past 21 sessions. The USDA attaché this week released a report estimating Ghana’s 2024/25 cocoa production at 700,000 metric tons, up from 530,000 in 2023/24 (+32%). The USDA number is 100,000 tons higher than the ICCO’s forecast in their quarterly update at the end of February.

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