Ghana Cocoa Production Down

COCOA

With fresh evidence of West African production issues, cocoa could extend its recovery move this week. Bloomberg News is reporting that Ghana’s 2022/23 cocoa production may come in as low as 650,000 tonnes, which is down from an initial Cocobod estimate of 850,000 and would be a 13-year low. As a result, 44,000 tonnes of their 2022/23 exports may have to be postponed. A key factor in the output decline has been a reduced fertilizer and pesticide use, which has been a problem in Ivory Coast and Nigeria as well. West African supply issues may continue through the first half of the 2023/24 season due to the El Nino weather event, which typically brings drier than normal conditions to the region.

COFFEE

While coffee could not avoid a seventh-straight negative daily result on Wednesday, the market was able to hold above Tuesday’s 7-month low. If there is a rebound in global risk sentiment, the market may be able to regain upside momentum. The Brazilian real closed higher yesterday for the first time this week after reaching a 10-week low on Tuesday, and this lent mild support to coffee on ideas it could ease pressure on Brazil’s farmers to market their coffee to foreign customers. Brazil’s largest co-op Cooxupe said that their farmers had completed 81.9% of this year’s harvest by August 11, up 7% from the previous week and their fastest pace in 3 years. ICE exchange coffee stocks rose by 1,169 bags on Wednesday, which was their first daily increase since late July.

COTTON

December cotton has a chance for a bounce today if export sales come in strong. Traders have turned negative this week after a sharp rally in the immediate aftermath of the USDA report on Friday. Worries about the Chinese real estate sector and the yuan falling to a nine-month low against the dollar raise concerns about demand for US cotton. The dollar was higher again yesterday, which is also not good for US export prospects. Crude oil was sharply lower, but it did not offer much support to cotton either. Last week’s report showed net sales of 280,707 bales for the week ending August 3. This was the largest since June 22. The 1-7-day forecast is still calling for above normal temperatures and below normal precipitation in Texas, Oklahoma, and most of the Delta and southeast. The 6-10 and 8-14-day forecasts have above or much above normal temperatures across the south, with normal to below normal precipitation. West Texas is right on the border between normal and below normal. This suggests that crop conditions will not have much opportunity to improve.

SUGAR

The prospects of increased rainfall in Brazil over the next few days have sent sugar prices to their highest levels this month. Updated forecasts call for wet weather over Brazil’s Center-South cane growing regions, which will slow harvesting and crushing. Strong Brazilian production and exports have been weighing on the market, and it is still vulnerable to harvest pressure. Prospects for Thailand’s 2023/24 sugar production to have a sizable decline from this year has also supported prices. The Petrobras wholesale gasoline price hike this week would normally be expected to support sugar on ideas it would strengthen ethanol demand. After Petrobras cut their wholesale gasoline prices four times earlier this year, ethanol demand diminished, and stocks built up over the ensuing months.

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