Tight Robusta Supply Provides Support

COFFEE

Low Vietnamese robusta coffee exports in February illustrate the tight global supply that could prevent coffee prices from pressing too much lower until the market gets a better handle on upcoming crops. Vietnam’s General Statistics office estimated that nation’s February coffee exports at 160,000 tonnes, 20% below a year ago. A Reuters poll had a median forecast for a global production surplus of 3 million bags in 2024/25 versus a surplus of 600,000 in 2023/24. Brazil is entering the “on-year” in its biennial cycle, but the dry conditions of the past several months are expected to limit the amount of improvement over last year. The key growing region of Minas Gerais has seen an improvement recently, and the forecast shows regular chances of rain over the next 14 days, which could improve the outlook.

COCOA

The International Cocoa Organization released its first official forecast for the 2023/24 marketing year yesterday, and it offered few surprises. The forecast called for a global supply deficit of 374,000 tonnes versus a 74,000-tonne deficit in 2022/23. This would be the third annual deficit in a row and the largest since ICCO records began in 1960. Global production was projected at 4.45 million tonnes, down 10.9% from 2022/23, with grindings at 4.78 million tonnes. Ivory Coast production was estimated at 1.80 million tonnes, an 8-year low, and Ghana’s at 580,000, a 21-year low. The global stocks/usage ratio was projected at 29.2%, which would be the lowest since 1978/79, when it fell to 27.7%. Rainfall chances seem to be improving in parts of Ivory Coast, but daily highs are still in the upper 90s.

COTTON

Yesterday’s weekly export sales report was a disappointment, but the market was under pressure before the numbers were released. The report showed US cotton export sales for the week ending February 22 at 39,966 bales for the 2023/24 (current) marketing year and 13,376 for 2024/25 for a total of 53,342. This was down from 188,576 the previous week and was the lowest since October 5. The old crop number was the lowest since August 17. Sales have reached 91% of the USDA forecast for the marketing year, which is right on the five-year average. The largest buyer this week was Turkey at 19,460 bales, followed by Ecuador at 10,565. China bought 1,777 bales, and Pakistan cancelled 7,804. Perhaps the rally of the past two months has priced US cotton out of the market. Recent USDA supply/demand data showed US supplies are tight but global supplies are not. Wildfires in Texas have brought fears of planting problems. The weekly US Drought Monitor showed drier than normal conditions persisting in parts of the Texas panhandle and drylands as well as parts of the Delta, including northern Alabama and central Louisiana. The report said much warmer-than-normal temperatures in Texas accompanying the dryness has drawn moisture out of the soil. It may be a bit early in the season for traders to get too concerned about upcoming crop, but the dry conditions could provide underlying support on breaks.

SUGAR

Sugar prices finished February with an abrupt change in fortune, and they start the month of March on the verge of a downside breakout move. A lack of upside follow-through after the International Sugar Organization doubled its global production deficit forecast for this season may have fueled profit-taking. The ISO forecast was described as a “small” deficit of 689,000 tonnes. Private surveys of analysts have called for a global surplus of 500,000 tonnes based on ideas that India’s production will be slightly larger than previously thought. The March contract had roughly 1.3 million tonnes delivered against it which was the second largest delivery for a March contract on record. Rain in the forecast for Brazil’s Center-South cane-growing regions put further pressure on prices as that can improve the yield outlook for the 2024/25 crop.

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