Coffee Extends Winning Streak

COFFEE

December coffee was close to unchanged overnight after extending its winning streak to five sessions in a row yesterday. The market continues to overcome strong Brazilian production and sluggish risk appetites as signs of improving global demand remain a source of strength. ICE exchange coffee stocks fell another 4,129 bags on Monday to reach a new 11 1/2 month low, and they are now less than half of what they were at the end of January. The 444,000-bag decline over the past 8-1/2 months is viewed as an indication of improvement in out-of-home consumption. The Brazilian real reached a 3-1/2-week high yesterday, and the stronger currency reduces pressure on Brazilian growers to market their crops. Safras & Mercado estimated that Brazilian producers had sold 56% of their crop as of last Tuesday versus 60% a year ago. The major Brazilian Arabica growing regions saw below average rainfall last week, and that may have a negative impact on upcoming production.

SUGAR

March sugar’s abrupt turnaround yesterday has put the market back within striking distance of making a new contract high. The likelihood that India will not allow any sugar exports for the entire 2023/24 season and for Thailand’s production to come in well below last season have helped the market regain upside momentum. The Brazilian firm Datagro forecast Brazil’s center-south 2024/25 sugar production at 42.6 million tonnes, up from 40.3 million forecast for this season. They expect the sugar market to remain in deficit because of declining production in Thailand and India. They also said there is a risk that wetter weather will prevent the processing of all the sugarcane available in Brazil in the current season, with the possibility of 25-30 million tonnes of cane being left if the fields to be harvested next season. The International Sugar Organization is forecasting a 2.1 million-tonne sugar production deficit in 2023/24.

COTTON

December cotton closed higher on Monday and traded to its highest level since last Tuesday, and the market may be viewing the recent selloff as enough of a correction for the moment. A rebound in risk sentiment supported cotton yesterday, with a reversal lower in long-term Treasury rates offering some hope for an improvement in demand. Higher equity markets overnight are supportive as well. The weekly Crop Progress Report showed 41% of the US cotton crop had been harvested as of Sunday. Progress slowed down in Texas due to rainfall in the western part of the state. The longer the crop goes unharvested, the more susceptible it will be to damage from heavy rains. The 6-10- and 8-14-day forecasts call for above normal chances of rainfall across most of the US cotton belt. Above normal rainfall is expected across most of Texas over the next seven days.

COCOA

December cocoa followed through on last Friday’s outside-day higher close with a gap-higher opening on Monday a move to a new 44-year high. After a surge in the first week of October , Ivory Coast port arrivals have slowed down, and they are now 16% behind a year ago. A higher minimum farmgate price for the new season had encouraged farmers to postpone deliveries in September, leading to a boost in arrivals in the first week of October. The quick decline in deliveries is further evidence of tight supply. Heavier than normal rainfall in west Africa last week disrupted the harvesting and drying of the early main crop, and this may diminish port arrivals over the next few weeks. This has been especially noted in Ghana, the world’s second-largest producer, as well as Cameroon. There were reports that southwest Ivory Coast was spared.

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