Cotton Rallied Off USDA Supply/Demand Report

COCOA

December Cocoa was near unchanged overnight and stayed inside yesterday’s range. The market traded to its highest level since August 30 yesterday. It has been on a mild uptrend over the past eight sessions, but it is still consolidating as it awaits the arrival of the 2024/25 main crop. Recent rains in west Africa have eased concerns after an extended dry spell that lasted from late August to last week. Most of Ivory Coast saw light to moderate rainfall of 1-15 mm over the last 24 hours, while Ghana was mostly dry except for some light rains in the southeast along the coast. World Weather Service said yesterday that areas from Ivory Coast to Nigeria and Cameroon will see a mostly favorable mix of rain and sunshine through the next week. Isolated to scattered and occasionally numerous showers and thunderstorms will occur most days with resulting rain light to moderate most often. The rains could delay harvest just as the main crop is getting underway. The US Climate Prediction Center has given a 71% chance that La Niña will emerge in the September-November timeframe. It is expected to persist through January-March 2025, but it is also expected to be on the mild side. La Niña has a tendency to bring cool temperatures to West Africa when it is present during the winter months. The trade may start looking more closely at Ivory Coast weekly arrivals data. Harvest has reportedly begun, but farmers may be reluctant to sell until next month, as they are hoping for in increase in the official farmgate price.

COFFEE

December NY Coffee was higher overnight and now appears headed to last month’s contract high. Ongoing dry conditions in Brazil are raising concerns about the upcoming crop. Earlier this week there were reports of buds dropping from trees due the dryness. World Weather Service said yesterday the pattern does not seem likely to change anytime soon. Producers are anxiously awaiting the first significant rain of the season to induce flowering, but the wait will continue. Conditions look much better in Vietnam’s Central Highlands, where their main robusta crop is grown. That region has been receiving adequate rainfall and regular rain is expected during the next week. Northern Vietnam was hit by a typhoon last week that likely caused some damage to their relatively small arabica crop. Vietnam’s domestic robusta spot prices increased this week to 121.5-122.0 million dong/ton from 119.4-120.2 last week, a gain of 1.5%-1.8%. London robusta future hit another new all-time high overnight, as robusta supplies remain very tight. The US CPC giving a 71% chance for La Niña to arrive in September-November timeframe and last through January-March 2025 could mean wet conditions for Indonesia this winter and cool temps for the key arabica region in Minas Gerais, Brazil. However, this event is expected to be on the mild side, which would mitigate its impact.

COTTON

December Cotton was slightly higher overnight following yesterday’s rally off the USDA supply/demand report. USDA lowered US 2024/25 cotton production to 14.51 million bales from 15.11 million last month, which was below the low end of expectations. Average yield fell to 807 pounds/acre from 840 last month. However, US exports were lowered to 11.80 million bales from 12.00 million last month. This brought ending stocks down to 4.00 million bales from 4.50 million last month and 4.68 million expected (range 4.10-5.25 million.) The US stocks/use ratio is 29.2%, down from 32.4% in last month’s report but up from 23.2% last year. The 10-year average for the ratio is 25.6%, with a range of 16.8%-41.0%. Weekly export sales were down from the previous week, but the market quickly cast that aside after the supply/demand numbers were released. The market is also waiting for news of Hurricane Francine’s impact on crops in the Delta. Parts of northern Mississippi and Arkansas received 3-4 inches of rain over the last 18 hours, which leaves the crops vulnerable to damage.  The US CPC giving a 71% chance for La Nina to arrive in September-November timeframe and last through January-March 2025 could bring hot and dry conditions to southern US, which could prevent west Texas from rebuilding subsoil moisture. However, the event is projected to be “mild.”

The USDA export sales report showed US cotton sales for the week ending September 5 at 116,052 bales, all for the 2024/25 (current) marketing year. This was down from 215,879 the previous week and not very impressive. Cumulative sales for 2024/25 have reached 4.764 million bales, down from 5.379 million at this time last year and below the five-year average of 7.119 million

SUGAR

March Sugar extended yesterday’s rally overnight, which came in the wake of a bullish UNICA report on Brazilian sugar production yesterday. The report showed Center-South sugar production for the second half of August at 3.258 million metric tons, down from 3.467 million from for the same period last year, a decline of 6.0%. Cumulative sugar production since the marketing year began in April has reached 27.169 million tons, up 3.9% from a year ago. The production surplus to year ago levels has been steadily declining since June 30, when it was 15.7% above a year ago. Sugar’s share of cane crushing was 48.9% in the second half of August versus 50.7% a year ago. There were 72.3 kg of sugar produced per ton of sugarcane versus 74.4 kg a year ago. Ethanol had a 51.15% share of cane usage versus 50.73% in the first half of August and 49.25% for the same period last year. Ethanol production for the period was 2.452 million liters, up from 2.295 million in the first half and 2.308 million a year ago. In the monthly supply/demand report, USDA lowered its forecast for US sugar imports in 2024/25 to 2.530 million short tons from 2.933 million in their August update. This is down from 3.834 million in 2022/23. The US CPC has given a 71% chance for La Nina to arrive in September-November timeframe and last through January-March 2025, which could mean wet conditions and cool temps for Center-South Brazil. However, the event is expected to be on the mild side, which would mitigate its impact. Workers at Australia’s largest sugar maker, Wilmar, voted to accept a pay offer, ending a month’s-long dispute that disrupted sugar production from time to time. Hurricane Francine produced wind gusts to 97 mph along the Louisiana coast and 70 mph inland, which was great enough to impact mature sugarcane, and some mangling and lodging of the crop was suspected, but World Weather Services does not believe the damage will as bad as feared. Rains in Brazil seem to be creeping northward. Parana saw up to 5 mm in the northern parts of the state over the last 18-hours, with up to 15 mm in the south.

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