Sugar Upside Limited by Supply Glut

SUGAR

March Sugar was slightly higher early Thursday and was close to taking out Wednesday’s weekly high. There are some ideas being reported this week that that low prices will lead to a reduction in cane and beet planted area in 2026. There has also been some movement by cane crushers in Brazil towards ethanol production and away from sugar. The most recent UNICA report showed that’s sugar’s share of crush for the second half of November was 35.5% versus 44.6% for the same period in 2024. There is still a glut of supply that could limit upside, even if the market is still within the vicinity of four-year lows. India could export as much as 1.5 million tons this year if prices move high enough. India could export sugar if world prices get high enough. We expect the UNICA update for Center-South Brazil cane crush and sugar production during the first half of December to be released this week. The last report showed that cumulative production for 2025/26 was running about 1.1% above a year ago. Brazil exported 2,913,040 metric tons of sugar in December, up from 2,833,681 a year prior. The market ignored new dietary guidelines released by the Trump administration recommending that people consume no added sugars (no more than 10 grams per meal) and avoid processed foods.

COCOA

March Cocoa was higher early Thursday, rejecting Wednesday’s low for the time being. Reuters, quoting market sources, reported that producing countries are holding back on cocoa sales as they await New York cocoa’s addition to the Bloomberg Commodity Index, which is expected to lead to about 30,000 to 40,000 lots of buying, starting on January 8. Cocoa grind data for Europe, Asia, and North America are due to be released on January 15, and there may be some apprehension about demand. World weather is mostly conducive to good crops. There may be some concerns about dryness in Ecuador. Unseasonable rains in West Africa are a mixed bag. The delay harvest and raise the prospects of disease, but they also set the stage for a strong conclusion to the main crop later this winter. ICE cocoa stocks increased by 5,697 bags on Wednesday to 1.644 million, their highest since December 16.

COTTON

March Cotton was lower early Thursday and was back below the 50-day moving average following a two day rally it. This leaves the long-term downtrend basically intact. This export sales report this morning had cotton sales at their lowest level since October, which was a disappointment after reaching almost 320,000 three weeks ago. The report showed sales for the week ending January 1 at 98,031 bales for the 2025/26 (current) marketing year and 22,491 for 2026/27 for a total of 120,522. This was down from 136,204 the previous week. Cumulative sales for 2025/26 have reached 6.598 million bales, down from 7.615 million at this time last year and still the lowest in 11 years. Sales have reached 59% of the USDA forecast versus a five-year average of 76% for this point in the marketing year. Shipments totaled 154,036 bales, up from 140,723 the previous week. For the USDA supply/demand report on Monday, a Reuters poll has an average trade expectation for US 2025/26 cotton production at 14.20 million bales (range 13.77-14.55 million), which would be  0.07 million from the December update. Exports are expected at 12.04 million bales (range 11.80-12.20 million), down 0.16 million, and ending stocks are expected at 4.56 million (4.20-4.80 million) up 0.06 million. World production is expected to come in around 119.46 million bales (range 118.80-120.00 million), down 0.33 million in December. Consumption is expected at 118.57 million, down 0.04 million, and ending stocks are expected at 75.62 million bales, down 0.35 million. Traders may be hoping for a strong exports report this morning. The last report showed net sales 136,204 bales, down from 183,560 the previous week and 319,649 the week before that.

COFFEE

March Coffee was higher early Thursday and was close to taking out Wednesday’s six-week high. The market has been supported this week by fears over a potential increase in US-Colombia tensions following the capture of Venezuelan President Nicolas Maduro. Colombia is the second largest arabica producer in the world and the second largest supplier to the US. On the other hand, despite that aggressive comments by the President Trump, the administration may be reluctant to move against other nations until the situation in Venezuela is stabilized. Trump may also be reluctant to do something that would push US coffee prices higher after the Brazilian tariffs last fall sent prices sharply higher. On the other hand, a lot of what is said by the President ends up happening. Brazil exported 210,281 metric tons of green coffee in December, up from 201,848 a year earlier. Reuters reported that coffee trade in Vietnam remained subdued on Thursday as farmers held back sales on expectations of better prices. Perhaps watching the US action?  ICE certified arabica stocks increased 4,798 bags on Wednesday to 461,829, their highest since October 23.

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