ADMIS News
SUGAR
Recent rainfall over Brazil’s Center-South cane growing regions is viewed as beneficial for the 2024/25 crop, and more rain is in the forecast for the next week. This marks a change from the dry conditions late last year and early this year, and this has undermined support for the sugar market. The two-week forecast for Center-South Brazil has a greater than 50% chance of rainfall in 11 out of the next 14 days. India’s Food Secretary said that there are no new proposals to increase the amount of sugar that mills can divert to ethanol production beyond the current 1.7 million tonnes that have been allowed for the 2023/24 season. The government is promoting corn as an alternative feedstock for ethanol production. The current forecast for India’s 2023/24 sugar production is 32.3-33.0 million tonnes, but traders are concerned this could be revised down given the government’s interest in promoting alternative feedstocks for ethanol. A main driver for the sugar market’s recovery off its December lows was the weather: Brazil’s dry conditions threatening their upcoming crop and India’s reduced crop from El Nino last year. With wet conditions returning to Brazil and El Nino set to end this spring, those concerns could ease.
COFFEE
Recent rainfall in Brazil, lower robusta prices, increasing ICE exchange stocks, and disappointing demand numbers have pulled support from the coffee market. May coffee reversed lower yesterday and extended those losses overnight to fall to their lowest level since January 22. Key coffee growing regions in Brazil have received rainfall recently, which has eased concerns about dry conditions late last year and early this year. Minas Gerais, Brazil has rain in the forecast for today and tomorrow, with more returning next Thursday and expected to continue for at least another week. ICE exchange coffee stocks increased by 8,565 bags on Thursday to reach their highest level since November. There are over 120,000 bags pending review.
COCOA
May cocoa extended its rally overnight to trade to another new contract high, with the nearby futures reaching another new all-time high, as more report of problems with West African production emerged. Ghana’s 2023/24 production is expected to come in around 500,000 tonnes, 39% below the target of 820,000, according to sources from COCOBOD. They blame strong seasonal winds and a lack of rain, as well as damage caused by illegal gold mining and swollen shoot disease. Traders have expressed concerns about demand from time to time, but the supply story continues to dominate the market and probably will continue to do so until West Africa weather improves. The trade is expecting a third straight global supply deficit in 2023/24, and the hot and dry conditions this winter have only widened trader’s expectations of the shortfall.
COTTON
Traders will be looking for a bullish catalyst to spark a resumption of the rally off the December lows. The main item may be the weekly export sales data this morning, as the strong pace earlier this year sparked the move to contract highs. Last week’s report showed net sales of 168,209 bales for the week ended February 8, down from 318,655 the previous week and the lowest since December 28. Another strong delivery number would be appreciated, as previous strong numbers have reduced the likelihood of cancellations. US supplies are reportedly tight, and traders wonder to what degree Brazil will pull business away from the US. The weekly drought monitor showed 10% of the US cotton production area was experiencing drought as of February 20, down from 13% the previous week and 19% a week before that. A year ago, that number was 45%. This portends a good start for the US crop this year.
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