Weak Dollar Improves US Cotton Export Outlook

COTTON

May Cotton held up pretty well yesterday in the face of a steep selloff in equities. The decline in the dollar to its lowest level since November does help US export prospects. The Cotton Association of India said overnight that their nation could import 3 million bales in 2024/25, up from 1.52 million in 2023/24. They expect India’s production to fall 10% from a year ago to 29.53 million bales, and demand is estimated to rise marginally to 31.5 million bales. In their latest update, USDA had Indian production falling 2% from last year. USDA export sales are running 96% of the USDA forecast, which is right in line with the five year average, which suggests USDA has little reason to change their export forecast for 2024/25 in today’s monthly supply/demand report. In their last report, USDA left 2024/25 production unchanged at 14.41 million bales and exports unchanged at 11.00 million. They lowered domestic consumption by 0.10 million bales to 1.70 million This put ending stocks at 4.90 million bales and the stocks/use at 38.6%. US cotton growing areas saw a significant increase in drought conditions last week, with 38% of production area under drought versus 28% the previous week.

COFFEE

The coffee market is chopping back and forth inside a range established in February. Brazil is expected to start seeing some rain this week, but World Weather Service say that the best chances for enough moisture to improve crop prospects will likely come this weekend and into next week. Up to now, dry conditions have resulted in crop stress and likely a reduction in cherry size and quality. The International Coffee Organization said yesterday that global exports of green coffee fell to 11.32 million bags in January, down 14.2% from a year ago. Last week we saw reports of some pushback against high coffee prices. At the US National Coffee Association annual meetings in Houston last week, global coffee traders and roasters said they had slashed their purchases to minimal levels as retailers were reluctant to commit to high prices. ICE certified arabica stocks increased by 3,145 bags yesterday to 797,826. Managed money traders were net long 54,912 contracts as of last Tuesday, down from a peak of 71,811 last April but still in the upper end of the historic range, which leaves the market vulnerable to heavy selling if support levels are taken out.

SUGAR

May Sugar approached the 200-day moving average overnight, and that level, 19.05 could be a key bull-bear line today. The market managed to rally in the face of a steep selloff in equities and weaker crude oil prices. Crop concerns in India helped lift the market to the 20-cent level last month, but heavy deliveries on the March contract set off a wave of selling. Drier-than-normal weather in Brazil has also raised concerns about production, but that nation is expected to see some rain this week. Another limitation to sugar prices is the potential increase in Mexican sugar entering into to the international market as a result of US tariffs. However, damage to the Louisiana cane crop after the region experienced two damaging freezes this winter could support US import demand.

COCOA

May Cocoa is lower this morning after having found support at last week’s three month low yesterday. The USDA attaché is looking for Ivory Coast 2024/25 cocoa production to “climb towards” 1.8 million metric tons, up from 1.76 million in 2023/24. They pointed out that heavy rainfall last September and October facilitated the spread of brown rot fungal disease in the country’s western and southwestern production regions, potentially affecting yields and that from December and into February, Harmattan winds with suboptimal rainfall has raised  concerns with growers. The latest ICCO update put Ivory Coast production at 1.850 million tons. Ivory Coast cocoa arrivals totaled 14,000 metric tons last week, down from 18,000 the previous week and 27,000 for the same week last year. Cumulative arrivals for 2024/25 have reached 1.400 million tons, up from 1.224 million at this point last year but the second lowest for this point in the season in the last five years. The five-year average is 1.542 million. Ivory Coast farmers interviewed by Reuters said recent favorable weather conditions were expected to improve the size and length of the mid-crop. They said small pods known as cherelles had turned into bigger pods on their plantations, a sign of a healthy crop. They said harvesting would slowly begin by the end of this month.  World Weather Service said satellite and surface weather observations suggested showers and thunderstorms were scattered across West Africa cocoa production areas over the weekend. They look for daily rounds of showers and thunderstorms through the next week in Ivory Coast, Ghana, and Cameroon, where resulting rain will be light to moderate most often with some locally heavy rain on occasion. Weather will be favorably mixed over the next ten days with some welcome and needed rain in Ivory Coast, Ghana and a few areas east to southern Nigeria. ICE certified cocoa stocks increased 47,614 bags yesterday to 1.531 million, their highest since December 3. Stocks are up 97,000 in the last three sessions.

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