Cotton Rallies to New Contract Highs

COTTON

May cotton rallied to new contract highs overnight, as a sharp increase in Chinese equity markets overnight boosted demand expectations. US exports have been better than expected over the past few months, even if they have slipped over the past couple of weeks. Perhaps traders are expecting China to return as an active buyer now that the Lunar New Year holidays are over. The US supply situation looks tight for the remainder of the marketing year, but the US is expected to see an increase in planted acreage this coming season. Last week’s US drought monitor showed 10% of the US cotton production area was experiencing drought versus 45% a year ago. Nearby cotton futures have broken above out above a 16-month consolidation this month, which is a bullish long-term development.

COCOA

The severity of the Harmattan wind this season has lowered expectations for the West African mid-crop to a degree that traders are now thinking the 2023/24 global supply deficit will reach 500,000 tonnes. The compares to deficits of 116,000 in 2022/23 and 216,000 in 2021/22 and would be the largest on record going back to 1960. Farmers in Ivory Coast say abundant rains are needed in the next two weeks to limit damage on plantations. No rain fell in Daloa last week versus a five-year average of 11.6 mm for the corresponding week. Ivory Coast cocoa arrivals totaled 35,000 tonnes for the week ending February 25, up from 20,000 for the same period a year ago. Cumulative arrivals have reached 1.163 million tonnes, down 30% from 1.667 million for the same period last year.

COFFEE

Coffee’s inability to complete a positive daily reversal yesterday sets the stage for further downside action this week. Recent rainfall in Brazil’s major Arabica growing regions has improved the outlook for the upcoming 2024/25 crop after the region received below average rainfall earlier in the season. Somar Meteorologia reported yesterday that Brazil’s Minas Gerais region received 59.5 mm in the past week, 131% of the historical average. More rain is expected this weekend. ICE exchange coffee stocks increased by 8,640 bags yesterday to 332,797. This is up 82,000 bags from January 31. There were 125,881 pending review.

SUGAR

The sugar market seemed to find support yesterday from recurring concerns about lower 2024/25 production in Center-South Brazil. Sucden commented that last year, rains in December-February were 25% above average, while this year they have been 30% below average. The forecast shows increased chances of rain over the next couple of weeks, with daily probabilities above 50% for all but three days. Sucden has forecast Brazil’s 2024/25 Center-South sugar production to come in at 40.8 million tonnes, down 1.8 million from 2023/24. They put India’s production at 28 million tonnes, down 1.8 million from 2023/24 and an 8-year low. Unica will release its Brazil sugar production report covering first half of February today. The previous report showed Center South sugar output for the 2023/24 marketing year was running 25.5% higher than a year ago. Harvest and crushing operations have been winding down for the season and are not expected to return to full speed until mid-April.

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