ADMIS News
SUGAR
The rains in Brazil this week have improved the prospects for the upcoming Brazilian crop, but lower production in India and Thailand continue to underpin the market. India is still absent from the export market, and there is talk of shipping delays out of Brazil. The bi-weekly UNICA supply report showed Brazil Center-south sugar production totaled 28,000 tonnes for the second half of January, down from 48,000 in the first half but up 68% from a year ago. Production continues to wind down for the 2023/24 marketing year, and the recent numbers were a fraction of what they were during the peak production period last fall. On an earnings call, the CFO of Brazilian sugar and ethanol producer Jalles Machado said that most of the areas that supply sugar cane for its mills are seeing favorable weather ahead of the next harvest, which begins in April. He stated that rains in January were better than the previous year and above the historical average in the state of Goias, which accounts for more than 70% of that company’s cane output. The shift to La Nina expected for the second half of 2024 would be favorable as rains would hit Goias earlier than usual. He also commented that ethanol prices in Brazil remain low due to high stockpiles. Tropical storm Lincoln is expected to hit northern Australia in the coming days. This would be the third major storm in two months.
COCOA
It may be dangerous to say so, but May cocoa is looking increasingly toppy after reaching its latest historic high a week ago. Global supplies are tight and look like they could stay that way for the foreseeable future. The question is whether demand will pull back enough to stabilize prices. A steady decline in open interest since mid-January is negative technical action. Call premium is starting to flatten, which also indicates the speculative fervor is easing. Sellers in this market have been repeatedly disappointed, however. The weather forecast for key growing regions in Ivory Coast show daily highs in the 100s and little rain for the next two weeks. Cocoa bean shortages have shut down Ghanan cocoa processors intermittently over the last few months, and like Ivory Coast, their port arrivals are running 30% or more behind a year ago.
COFFEE
May coffee fell below moving average support this week, and it has failed on two attempts to move above it, and a failure to do so in today’s session could encourage a bigger selloff. Brazilian Arabica growing areas have rain in the forecast through late next week, which should benefit their upcoming crop, and this has weighed on prices this week. Vietnamese robusta prices were softer this week, but supplies remain tight. Through January, Colombia’s 12-month annualized production pace has risen to 11.438 million bags, the fifth straight monthly increase. This is still well below the readings for January 2020 and January 2021, but it is their highest 12-month total since November 2022.
COTTON
May cotton is close to taking out its contract high from May 2022 at 96.13, but this price does not look particularly high when compared to the long-term charts. Nearby cotton has broken out above a long-term consolidation stretching back to October 2022, which could be a major turning point for the market. The export sales report yesterday was not particularly impressive, but the strong pace of physical exports allowed the market to extend its recent rally. Sales and exports have exceeded previous expectations, as the market had feared stronger competition from Brazil and Australia. Yesterday’s report showed US cotton sales for the week ending February 8 at 168,209 bales, down from 318,665 the previous week and the lowest since December 28. Total exports for the week came in at 276,057 bales, which was up from 248,512 the previous week and the second highest since last June. Cumulative sales for 2023/24 have reached 89% of the USDA forecast for the marketing year versus a five-year average of 86% for this point in the season.
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