Upcoming Brazil Weather Ideal for Sugarcane

SUGAR

May Sugar gapped higher overnight and traded to its highest level since February 26. The market is approaching the 20-cent level, an area that caused trouble for the bulls late last month when it made four attempts to take that level out in four straight sessions and sold off hard when it failed to do so. At the time, heavy deliveries against the March contract added to the selling pressure. Recent dry weather in Center-South Brazil has been a marginal concern for the upcoming crop, but it is still early. World Weather Service said last week that the Brazil’s weather looks to be almost ideal for sugarcane over the next week to ten days. The Indian Sugar Mills Association last week lowered its forecast for Indian sugar production for the 2024/25 season. Traders there are doubting they will reach the 1.0 million barrel quota. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 16,581 contracts of sugar for the week ending March 11, reducing their net long to 18,335. This is close to a neutral position when compared to the record  net long of 285,000 and the record net short of 235,000.

COFFEE

Brazil’s relative lack of rain during their rainy season is an ongoing concern for the coffee crop there. World Weather Service expects a routine occurrence of light rain this week, but more will be needed to improve crop quality. There is still a full month left to the rainy season and coffee areas need every bit of moisture they can get. Some of the production impacts from recent weeks of dry weather may not be reversible. The recent strengthening in the Brazilian real reduces the incentive to sell. The April Real was approaching a four-month high from February on Friday. ICE certified arabica stocks fell 5,541 bags on Friday to 796,736. Stocks have been chopping around between 780,000 and 810,000 bags for the past three weeks. Rabobank said last week that it expects ICE stocks of both robusta and arabica to increase in the weeks ahead, as both types of coffee traded at tenderable parity in certain origins at various points over the past few months. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 2,500 contracts of coffee for the week ending March 11, reducing their net long to 52,412. This is the smallest net long since October but still in the upper end of the historic range, which leaves the market vulnerable to heavy selling if the funds start to bail. On the other hand, the current net long is almost 20,000 contracts below the record 71,811, which suggests the is room for fund buying as well.

COTTON

May Cotton has made a significant rally off its contract lows from early this month with improving export sales, a weakening dollar, and a deeply oversold condition of the market attracting buyers. The funds were only recently  holding a record net short position, and Friday’s Commitments of Traders reports indicated they well were still close to that level. Friday’s report showed managed money traders were net buyers of 3,547 contracts for the week ending March 11, which reduced their net short to 76,410, but the previous week was a record. Lower plantings are expected this spring, and current dry conditions in Texas may be encouraging the market to build a weather premium. World Weather Service says rain is needed in south and west Texas to provide more favorable soil moisture for spring planting. West Texas is not expected to see any significant rain through the next two weeks, but that area still has time. The situation in south Texas is more urgent, as dryland planting is normally under way at this time of year. Last week’s Export Sales Report showed the strongest sales since January 16 and the strongest shipments since last season. Vietnam has the most commitments for 2024/25 at 2.154 million bales, up from 1.085 million last year at this time. Pakistan has committed to 2.134 million versus 1.467 million last year and Turkey 1.448 million versus 721,000 last  year. The fly in the ointment is China, which has only committed to 805,000 bales versus 4.153 million a year ago. Total commitments for 2024/25 have reached 11.033 million bales versus 11.565 million a year ago, but the deficit of 532,000 is the narrowest it has been so far this season. Commitments were 1.446 million bales behind a year ago in early January. Sales are on par with USDA expectations.

COCOA

May Cocoa fell to its lowest level since November on Friday, and it is close to testing that level this morning. It is also close to testing the 200-day moving average, a line that it has held above since November and which could be a key bull-bear line today. Ivory Coast cocoa arrivals for the week ending March 16 came in at 14,000 metric tons, steady with the previous week and up from 0 for the same week last year. Cumulative arrivals have reached 1.414 million tons, up from 1.224 million last year but down from a five-year average of 1.564 million. Weekly arrivals have a tendency to bottom out for the season around this week, before the mid-crop harvest begins. The weather in West Africa has turned increasingly wet over the past few weeks, and this has eased concerns about the upcoming mid-crop. World Weather Service says it expects daily rounds of showers and thunderstorms through this week in Ivory Coast, Ghana, and Cameroon, with some locally heavy rain on occasion. ICE certified cocoa stocks increased 37,637 bags yesterday to 1.678 million, their highest since November 13. Stocks are up 243,744 bags in the last seven sessions. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 900 contracts of cocoa for the week ending March 11, reducing their net long to 13,863. This is the smallest net long since last April and the second smallest since February 2023, but it is not oversold.

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