ADMIS News
COFFEE
March coffee was slightly lower overnight as it extended Monday’s selloff. The recent buildup of ICE exchange coffee stocks, revisions higher in Brazilian production, and a strengthening Brazilian real are three negatives that could inspire further declines. The pullback in the Brazilian real to its lowest level in three months weighed on the coffee prices yesterday on ideas it would make Brazilian growers more aggressive at marketing their coffee supply. Safras and Mercado raised its 2022/23 Brazil coffee crop estimate to 61.1 million bags from a previous estimate of 58.9 million. Somar Meteorlogia reported that Brazil’s Minas Gerais region received 30.9 mm of rain in the past week, which was 49% of the historical average. However, the forecast for the region has a chance of thunderstorms every day from today through next Monday, with the biggest chances Thursday through Saturday. The Robusta market has been underpinned by supply tightness in Europe, driven partly by disruptions in the flow from Asian producers through the Red Sea.
COCOA
March cocoa extended yesterday’s rally overnight to another new 46-year high. The market is focusing on the hot, dry conditions in Ivory Coast, Ghana, and Nigeria, which are raising concerns about the upcoming mid-crop. Aggressive spec buying has extended the recent rally into overbought territory, but there has been no top indicator. Farmers interviewed this week said that cocoa pods were developing well on trees in Ivory Coast last week but that adequate rain was needed in the next 15 days to improve soil moisture. Traders are watching the progression of the Harmattan, as a severe one can kill small pods. Bloomberg reported today that Ivory Coast could see a shortfall of 70,000 to 100,000 tonnes relative to the contracted main-crop sales. Sources said the country’s regulatory body, the Cocoa-Coffee Council (CCC) has sold about 1.35 million tonnes in forward contracts for the 2023/24 main crop, which runs through March. Forward sales of the 2024/25 main crop have already been halted. Sources inside the CCC said the group expects April-September mid-crop production to fall to 400,000-450,000 tonnes, down from 550,000 last year. There are reports that a Ghanaian processing firm has asked the nation’s regulator, Cocobod, for permission to import cocoa beans. This underscores the tight supply situation there.
COTTON
March cotton is close to taking out Monday’s four-month high this morning, as the market continued to defy a strong dollar and disappointment that the long-awaited Fed rate cut appears to have been pushed off into the future. Recent strength in weekly US exports has supported a move to levels not seen since harvest, when the market was coming to grips with the US production shortfalls due to drought. The strong export pace has traders thinking the 2023/24 crop could be nearly sold out. For the USDA supply/demand report on Thursday, the average trade expectation for US 2023/24 ending stocks is 2.86 million bales, with a range of guesses from 2.65 to 3.00 million. This would be down from 2.90 million in the January update.
SUGAR
March sugar traded in a narrow range overnight near the bottom of yesterday’s range. Record sugar production in Brazil continues to exert pressure on the market, even in the face of lower production in India and Thailand. StoneX is now projecting a 2023/24 global sugar surplus of 3.4 million tonnes versus their previous estimate of 730,000. They credit the record production from Brazil this season. As of January 15, South-Center Brazilian production was running 25% ahead of last year. The pullback in the Brazilian real to its lowest level in three months provides additional incentive for mills to produce sugar for export. This contrasts with the concerns about Brazil’s 2024/25 crop due in the wake of the dry conditions of the past few months. A recent improvement in rain amounts may have mitigated some of those worries.
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