Global Cocoa Supply Remains Tight

COCOA

In just six sessions, May cocoa fell $738 (11%) and then rallied $767 back to new all-time highs. The global supply setup remains extremely tight. The International Cocoa Organization is forecasting a 374,000-tonne global production deficit for 2023/24, the largest on record. This year will be the third straight deficit, and there are expectations for fourth one in 2024/25. Last week’s Ivory Coast port arrivals were higher than year ago levels, but their full-season total remains 29% behind last year. Rainfall was above-average in most of Ivory Coast’s cocoa growing regions last week, raising hopes for the mid-crop outlook after weeks of dry weather. The dry season runs from mid-November to March. The market remains extremely volatile, and the improvement in rainfall could spark more bouts of profit taking, but the market has defied any attempts to pick a top.

COFFEE

The coffee market has received mildly bullish supply news this week. Somar Meteorologia reported Monday that Brazil’s Minas Gerais region received 29.4 mm of rain last week, which is only 50% of the historical average. This has added to concerns about 2024/25 crop. Tight robusta supplies continue to be a source of strength for the NY Arabica market. Last week, Vietnam’s General Statistics Office reported that the nation’s coffee exports in February fell 20% year on year to 160,000 tonnes. There were more reports yesterday that Vietnamese growers were reluctant to sell as they were waiting for higher prices. ICE exchange coffee stocks increased by 10,560 bags yesterday to 371,107, their highest level in three months.

COTTON

The selloff in May cotton had a brief respite yesterday as apparently the lower prices attracted some buyers, but the market still closed sharply lower and held near the bottom of yesterday’s range overnight. Bullish cotton traders may have been hoping for strong stimulus measures to be announced at China’s National People’s Congress this week, and instead they only got a reiteration of a 5% growth target and no big-ticket stimulus plan. The Australian agriculture ministry has raised its estimate for the country’s 2023/24 cotton production to 1 million tonnes from a previous estimate of 925,000, as summer rains and a fading El Nino have improved the outlook for their crops.

SUGAR

Sugar prices have been unable to find their footing, and they are approaching a retest of their December lows. Dry weather in Brazil’s Center-South region this winter leaves the nation hard-pressed to repeat the record output from 2023/24. At the Dubai Sugar Conference, the Bunge CEO said his company expected a 1.6 million-tonne global production deficit for 2024/25. They expect Center-South Brazil sugar production to fall 4.4% on the year to 40.8 million tonnes. Cane production is expected to fall 9.6% to 598 million tonnes, but the impact would be partially offset by an increase in the sugar mix of cane crushing to 51.4%, up from 48.8% in 2023/24. The India Sugar Mills Association (ISMA) said that India’s October-February sugar production was 25.54 million tonnes, 1.2% behind last season’s pace. With limits in place for how much cane crushing can be diverted to ethanol production, this suggests India to see higher sugar production this season than previously thought.

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