Trade Awaits Brazilian Crop

COFFEE

March Coffee was holding firm overnight after trading to a new contract high yesterday. The nearby contract pushed thought is May 2011 high yesterday to reach is highest level since peaking at 318.00 in May 1997. There were reports of some Brazilian farmers holding back on sales as they wait for even higher prices. Over the weekend, there were reports that heavy rains destroyed 15% of Costa Rica’s crop. At 1.1 million bags (all arabica) forecasted by the US prior to the rains, this would put the loss at 145,000. This may not seem very consequential compared to a 45 million bag-crop out Brazil, but at this point, marginal changes matter. The trade is waiting to see how the upcoming Brazilian crop performs after the severe drought this year. Conditions have improved over the past several weeks with the arrival of rain, but it may be too late. Minas Gerais rains were very light over the past 24 hours. January London (robusta) Coffee traded to a new contract high yesterday, as the NY arabica contract has taken the lead for a change.

COCOA

March Cocoa edged lower overnight but held inside Friday’s breakout range. Ivory Coast farmers interviewed by Reuters said below-average rains mixed with long sunny spells in most of the country’s main growing regions gave a boost to the October-March main crop last week. Farmers said the weather was helping them dry beans “properly” and that they would continue to harvest big pods until late January. They also said buyers are not complaining about cocoa quality. Farmers in other regions were more reserved, saying more rain is needed in December and that the seasonal dry Harmattan wind was starting to blow. It seems the below average rains are a key sticking point. Some traders are concerned that tight near term supplies will push prices higher. This week’s Ivory Coast arrivals update showed arrivals holding steady with last week at 94,000 metric tons, up from 64,000 year ago. Cumulative arrivals since October 1 have reached 643,000 tons, up 34% from this point last year

SUGAR

March Sugar was higher overnight but remained inside the down-trending channel of the past two months. We look for the UNICA bi-monthly report on Brazilian Center-South sugar production for the first half on November to be released this week. The market may need to see cumulative production move below a year ago to confirm the low expectations for the 2024/25 crop. During the second half of October, production was 1.78 million metric tons, 24.3% below a year ago. Cumulative production since the marketing year began on April 1 had reached 37.4 million tons, up 0.3% from last year. This was down from being as much as 66% ahead of a year ago in early May,  but it has long been expected that this year’ s production would eventually fall behind because of the drought. USDA recently lowered its expectations for Brazil’s production for 2024/25, and ISO narrowed the estimated surpluses for 2023/24 and 2024/25. The drought this year was finally broken, but it was likely too late to improve the 2024/25 crop. The outlook for 2025/26 has improved, but the dry soils and fire damage in September took their toll.

COTTON

March Cotton was lower overnight after trading to its highest level since November 12 yesterday. The dollar index is lower again this morning, which may improve US export prospects after the currency reached its highest level in two years on Friday. US export sales were the strongest of the marketing year last week, leaving some to speculate that the stronger sales were in anticipation of the tariffs that are expected to be put in place under the Trump Administration. There was also a story in Reuters that farmers in Brazil were planting more cotton and less corn, following a successful season that allowed Brazil to overtake the US as the world’s biggest cotton exporter. The weekly Crop Progress report showed 84% of the US cotton crop had been harvested as of November 24, up from 77% the previous week and 81% a year ago and slightly above the five-year average for this date of 83%. Texas was 80% harvested, up from 72% last week and 74% a year ago and ahead of the five-year average at 77%. Georgia was 77% harvested, up from 69% last week but down from 78% a year ago and behind the five-year average of 81%. North Carolina was 81% harvested, up from 75% last week but down from 92% a year ago and behind its five-year average of 88%. These last two suffered damage from drought and then hurricanes, suggesting a greater possibility of abandonment.

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