SUGAR
Port delays that are keeping Brazil’s record sugar production from alleviating tight global supplies, coupled with lower output from India and Thailand this year, have held sugar prices in a mostly sideways pattern for the past 2 1/2 months. The International Sugar Organization this week raised its forecast for global production because of Brazil’s strong crop, thus reducing the projected global shortfall for 2023/245. India’s sugar mills have produced 1.3 million tonnes of sugar during the first six weeks of the 2023/24 season, down from 2.2 million for the same period last year. This is not necessarily a surprise after their below average monsoon rainfall this summer, but a 41% decline might be larger than expected. March sugar has traded in a tight range over the past two days and has managed to hold its ground above the 50-day moving average, and that level could be a bull bear line today. The December ICE London white sugar contract had 262,750 tonnes delivered against it, which is the smallest December delivery since 2020.
COCOA
The cocoa market has been resilient, as it has recovered a large portion of Tuesday’s heavy losses over the past two sessions and has worked higher again overnight. The supply outlook remains bullish, but questions over demand remain with prices at 45-year highs. West Africa’s dry season is expected to begin in the next few weeks, which could slow their production further. The main crop is already behind year ago levels after the region received too much rain over the summer, and this was made worse by reduced fertilizer and pesticide usage. Nigeria’s AFEX commodity exchange forecast their nation’s 2023/24 cocoa production to be down 4.4% from 2022/23 due to aging trees and a lack of adequate pesticide use. In its latest update, the US Climate Prediction Center is calling for El Nino to end during the May-June-July timeframe, which could improve the outlook for the late midcrop period. The CPC does not show a strong correlation between El Nino and west African weather, there have been time in the past that the region has experienced dry conditions during those cycles. El Nino does tend to bring wetter than normal conditions to Ecuador during the December-February time frame, which could cause problems with their crop.
COFFEE
March coffee reversed lower after putting in a new 4 1/2 month high on Thursday, which is a negative technical development, and it extended those losses overnight. ICE exchange coffee stocks fell 7,401 bags on Thursday to 289,699, another new 24 1/2 year low, but there are now 7,550 bags waiting to be graded, which raises the chances that stocks may be close to putting in a low. The increase may put further pressure on the market following recent talk that there might be a rush to resubmit old coffee for grading in front of an ICE rule change that would prevent such activity that is due to start at the beginning of next month. Reports of port congestion in Brazil have supported the market recently, but their strong crop this season remains a source of pressure. Hot temperatures in the Minas Gerais region are expected to extend into next week, and this could raise concerns about Brazil’s upcoming crop.
COTTON
The cotton market has bounced off oversold levels this month, but it may need additional positive demand news to extend its rally. Yesterday’s export sales report was a bit of a disappointment, as it showed US cotton sales for the week ending November 9 at 328,348 bales for the 2023/24 marketing year and 30,388 for 2024/25 for a total of 358,735. Sales have reached 63% of the USDA forecast for the marketing year versus a five-year average of 67% for this point in the season. The largest buyer this week was China at 176,237 bales, followed by Mexico at 46,194. The fact that China is still actively buying US cotton could lend support to the market. Analysts still are still fretting over the health of the global economy, particularly for China, which is a key driver for cotton demand. Lower inflation data this week helps improve the overall picture. March cotton has staged an impressive bounce off last week’s lows, but it could still rally another 3.00 cents to reclaim 50% of the decline off the September highs.
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