Too Much Rain in Southern Texas

COCOA

December Cocoa was near unchanged overnight after yesterday’s steep selloff. The market has been under pressure this week from optimistic reports on the upcoming west African crop, which is due to begin harvesting this month. World Weather Service says rainfall is still short in southern Ivory Coast and Southern Ghana and that this may continue through the first half of September, which may reignite concerns about the crop. However, periods of rain alternating with sunshine are ideal growing conditions. Ghana is expected to raise its farmgate price 45% this season, which they hope will pull in supply for export and prevent smuggling out of the country.

COFFEE

December Coffee was near unchanged overnight after finding support at the 50% retracement of the August rally. The market is supported by tight old-crop robusta supplies and uncertainty over the upcoming Brazilian arabica crop. Brazil will eventually need rain to induce flowering. Their dry season runs through November, but conditions have been exceptionally dry this year. Dry and warm weather is expected to prevail over the next week to ten days. Showers will be limited to Bahia coastal areas and miss the main coffee regions of Minas Gerais. Typhoon Yagi is expected could bring heavy rains and damage to northern Vietnam, which could affect the Arabica growing areas, but it will miss the main robusta areas in the Central Highlands. (Arabica represents about 4% of Vietnam’s total production.) Cash trading in Vietnam is quiet as traders await the arrival on the new crop harvest, which usually does not begin until next month. ICE arabica stocks increased by 9,591 bags yesterday to 823,825 after falling 34,139 the previous day.

COTTON

It is getting late enough in the season that any additional rainfall may be too late to help the Texas crop and could instead cause problems. US crop conditions improved substantially last week, and yet the market only saw a mild setback yesterday in response. Recent rainfall in west Texas has improved the outlook for the crop there, but heavy rains in Blacklands, Coastal Bend, and south Texas have delayed harvest and may have cause some discoloration. Concerns about boll rot could emerge if the rains keep up. The USDA attaché yesterday forecast India’s 2024/25 cotton production at 25 million bales, up from USDA’s previous, official forecast of 24.5 million. Harvested area was lowered to 11.8 million hectares from 12.0 million previously, and yield was raised to 461 kg/hectare from 445. However, stocks/use was lowered to 34% from 37% previously and 39% last year. Elsewhere, the South American harvest is just about complete, which may allow the US to capture some business. The dollar was down for the second straight session overnight, which improves US export prospects. China is expected to have a very strong crop this year. Weekly export sales will be released tomorrow because of the holiday this week. Last week’s report showed net sales of 135,187 bales for the week ending August 22, which was the highest since the marketing year began on August 1. Cumulative sales 31% of the USDA forecast for the 2024/25 marketing year versus a five-year average of 52% for this point in the season.

SUGAR

Typhoon Yagi could produce maximum sustained wind speeds of 140 mph today, which will have potential to induce serious damage to the Leizhou Peninsula of western Guangdong China and could damage some of the sugar cane. October Sugar was slightly higher overnight after the market held retracement support this week. Brazil’s Datagro lowered its forecast for 2024/25 center-south sugar production to 39.3 million metric tons from a previous forecast of 40 million because of the recent wildfires in the cane growing areas. They lowered the sugarcane crush to 593 million tons from 602 million previously. As of the last UNICA report, 2024/25 center south sugar production was running 5.4% ahead of a year ago, but the pace has been declining for the past couple of months, as the unusually dry weather this year has started to weigh on yields. Production is expected to eventually fall behind year ago levels.

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