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US Cotton Crop Uncertainty


December cotton has been consolidating since putting in a 3-month low last Friday, and it may see a corrective rally given the remaining uncertainty about the US crop. Prices held up surprisingly well overnight in the face of a broad-based selloff in equities. Recent heavy rains in west Texas have likely slowed the harvest and caused some damage, and it has increased the threat of boll rot. This could mean further reductions in US production in upcoming USDA reports. However, demand remains a big concern, as world ending stocks, while tighter than last year, are expected to be the second largest since 2019/20.  Trade tensions have pushed China to buy from Brazil and Australia, but the smaller US crop means less cotton available for export as well. Rainfall totals this week in west Texas totaled 0.70-1.4 inches with some areas seeing as much as 2.7 inches. Drier weather is expected to return this Sunday and to last at least through November 8.

cotton field w close up


December cocoa has been consolidating since reaching a 44-year high on Monday, but with global risk sentiment deteriorating, it could be vulnerable to a pullback. Lower equities and weakness in the euro and British pound all add to selling pressure. West African supply issues during the early main crop harvest continue to provide underlying support. There are concerns that recent heavy rainfall will lead to the spread of disease and rot, which would further reduce cocoa production. El Nino may bring heavier than normal rainfall to Ecuador’s main growing areas this year, which could lower their output. There is also the threat that it will bring drier conditions to west Africa, but that has not materialized, yet.


After rallying 25.35 cents in eleven sessions, the coffee market may have gotten ahead of itself and may see further downside before it finds its footing. A risk-off mood in global markets weakened coffee’s out-of-home demand prospects and became the trigger for a wave of profit-taking, and further weakness in the stock market overnight will add to the pessimistic mood. December coffee’s failure to hold above the 200-day moving average after trading above it for the first time since June was a disappointment to the bulls. The outlook for Brazil’s upcoming 2024/25 Arabica crop has improved following recent rainfall over major growing areas.


Sugar’s volatile price action on Wednesday may be a sign that it is reaching a near-term top after trading to a new contract high. The Brazilian trade group Unica’s bimonthly supply report showed Center-South sugar production for the first half of October at 2.247 million tonnes, up 22.0% from the same period last year. The cane crush was 17.6% above last year. Shipping bottlenecks in Brazil continue. Water levels in the Amazon basin are starting to improve after the recent rainfall, but the rains are also interrupting loading at the port of Santos. Most terminals are open-air, and sugar cannot be loaded when it is raining. The Chinese trading firm Cofco expects logjams to recur until at least 2025, when they open their new terminal. This year’s bumper soybean, corn, and sugar crops are stretching capacity.


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