Dec Cocoa Finished With A Gain

COCOA

December cocoa finished October with a $399 gain and a new 44-year high, but the market may have gotten ahead of itself. A Reuters story overnight suggests Ivory Coast farmers have turned optimistic about their upcoming crops, with interview subjects across the nation saying above-average rainfall last week bodes well for the development and quality of the October-March main crop. They said that trees were full of ripe and ripening pods and that they expect two abundant harvests per month starting in November and that they do not expect any shortages until February. This news is in sharp contrast with repeated reports out of West Africa this year that heavy rains and a lack of fertilizer and pesticide usage have caused extensive problems with black pod and other diseases. There have also been concerns that El Nino would bring drier than normal conditions to the region, but so far that has not happened, and the recent rains may have assuaged those concerns. Ivory Coast port arrivals since the start of the new marketing year on October 1 are down 23% from last year, which is evidence of the poor growing conditions this year.

COFFEE

December coffee broke a four-session losing streak yesterday and completed a monthly reversal higher in the process. Bottlenecks at Brazil’s Port of Santos are slowing the flow of exports from that country and are raising concerns about tightening supplies for Europe and North America. ICE exchange coffee stocks fell 997 bags on Tuesday and reached a new 11 1/2 month low. They finished October at 389,138 bags, their second lowest month-end total since May 1999. Dealers said a firm cash market is preventing coffee from arriving at the exchange. December coffee is trading at a 2.65 premium to March, up from a 0.25 premium as recently as October 25, which is another indicator of tight near-term supply. The Brazilian real closed higher yesterday after falling to its lowest level since October 10, and this reversal raises hopes that the stronger currency will ease pressure on Brazilian growers to market their near-term coffee supply.

COTTON

December cotton sold off hard on Tuesday and closed at its lowest level since July 7, as traders blamed harvest pressure and a lack of demand. This week’s crop progress report showed 49% of the US crop had been harvested as of Sunday, up from 41% the previous week. The 1-5-day outlook has no rain across the US cotton belt, which should help move harvest along at a rapid pace. Yesterday’s recovery bounce in the Dollar Index also makes US cotton appear less competitive on the global market. Despite a poor US crop, world supplies are not that tight. US ending stocks for 2023/24 are projected to fall to their lowest level since 2016/17, but world stocks are expected to be higher than they were in 2021/22. Brazilian exports could surpass the US for the first time since the 1800’s.

SUGAR

March sugar rallied overnight after the Indian Sugar Mills Association lowered its forecast for 2023/24 sugar production to 33.7 million tonnes, down from 36.6 million in 2022/23. A representative from a leading trading firm reiterated that the Indian government is unlikely to allow exports given the lower production, domestic demand needs, and diversion of cane to ethanol production. Thailand’s government approved a new measure to make sugar a “controlled” commodity, with any exports above 1 tonne having to be cleared by a regulatory panel. Recent rainfall over Brazil’s Center-South cane growing regions could cause harvesting and crushing delays. Brazil’s Paranagua port plans to resume operations at berth 201 on Saturday after a suspension due to a fire last weekend.

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