May Cotton Extends Recovery Overnight

COTTON

May cotton extended its recovery move overnight as it continued to consolidate inside its wide range of the past couple of weeks. Yesterday’s export sales report showed US cotton sales for the week ending February 29 at 52,012 bales for the 2023/24 marketing year and 15,077 for 2024/25 for a total of 67,089. Traders may have been more encouraged by the shipments number, which at 330,790 bales was the highest since January 25 and second highest since May. The strong shipment pace keeps outstanding sales low and reduces the chances of cancellations. For the monthly USDA supply/demand report today, a Bloomberg survey has an average trade expectation for US 2023/24 ending stocks at 2.72 million bales, with a range of expectations from 2.55 to 2.9 million. This would be down from 2.8 million in the February report and down from 4.25 million in 2022/23.

COFFEE

A sharp rally in robusta coffee prices and ongoing concerns about the upcoming Brazilian crops helped lift May NY futures out of their recent consolidation zone yesterday. Key growing regions in Brazil experienced drier than normal conditions from November through the first half of February, and this has raised concerns about the 2024/25 crop, as the dry conditions hit during the flowering period. Robusta prices reached all-time highs yesterday, amid reports that Vietnamese farmers are holding back 30%-35% of their crop, waiting for higher prices. The Brazilian real reached its highest level in a week yesterday, which lent support to coffee on ideas this eases pressure on Brazilian growers to market their remaining supply.

COCOA

May cocoa’s failure to retest Monday’s record high this week may have disappointed recent longs and left the market vulnerable to long liquidation selling. Hawkish post-ECB meeting comments may have raised concerns about European demand going forward. There were reports that Ivory Coast’s Coffee and Cocoa Boards expect this year’s mid-crop production to be between 450,000 and 500,000 tonnes, down from 600,000-620,000 last year. Ivory Coast’s Coffee and Cocoa council said it will not change the fixed farmgate price it pays to farmers for the upcoming mid-crop. They stated the price will remain the same because export contracts are sold a year in advance. This underscores a long-term structural issue in the market that hinders the ability of growers to get the appropriate signals from the market.

SUGAR

Brazil’s major cane growing areas have rainfall in the forecast this week, but conditions are expected to shift to mostly dry and very warm pattern next week. The trade is expecting Brazil’s 2024/25 output to be down from the record levels from 2023/24 because of the dry conditions the nation has experienced over the past few months, but the rainfall does mark a slight improvement in the crop outlook. Brazil exported 3.02 million tonnes of sugar in February, three times the volume a year earlier. Indonesia’s Sugar Association expects their domestic sugar production to increase 5% in 2024/25. China’s agriculture ministry has trimmed its forecast to 9.5 million tonnes from 10 million, after colder weather and rains hurt cane yields in the nation’s south.

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