Cocoa Falls on Demand Concerns

COCOA

May Cocoa edged lower overnight, falling to its lowest level since Monday. After managing a modest rally off contract lows earlier this month off an oversold condition and on ideas that the lower official farmgate prices in Ivory Coast and Ghana would help draw down burdensome supplies, traders still worry about reduced demand because candy manufacturers have reduced the amount of chocolate in their products (thinner coatings, alternative ingredients) and strong production this year that will expand the global surplus. World Weather Inc. said west-central Africa precipitation will continue periodically and favorably for early season cocoa development. Showers and thunderstorms will continue to pop up periodically from Ivory Coast to Cameroon cocoa production areas during the next week.

COFFEE

May Coffee was higher early Thursday following a brief selloff on Wednesday. The market failed to take out its March 9 high yesterday, but it did not collapse, and that level 301.65 could be a bull/bear line today. Brazil’s largest coffee cooperative, Cooxupe, expects its 2026 coffee exports in to total around 4.4 million bags, down from 4.9 million in 2025. They say this reflects a smaller 2025 harvest, which will limit shipments in the first half of 2026,  but that the 2026 is on track for higher productivity. There have been reports of farmers holding back sales in the hope of higher prices. A strong domestic currency reduces the incentive to sell for export, and the Brazilian real is near its highest level in 18 months. There have been some suggestions that the coffee market could face the same type of precipitous decline that the cocoa market has endured. However there are some differences in their demand and production cycles. Coffee production is not a concentrated as cocoa, which has a most of its production in a relatively small geographic region (West Africa), leading to bigger extremes in the production cycle. Cocoa growers are a not well capitalized as coffee growers, and they depend a great deal on support from their governments. The cocoa sector has a tighter concentration of buyers who wield more power in the marketplace.

SUGAR

May Sugar is sharply higher for the second straight session, as the market finds support from soaring energy prices off the Iran war. Higher gasoline prices would increase the incentive for can crushers in Brazil to increase ethanol output at the expense of sugar production. The rally  is likely being fueled by short covering on the part of the funds, who up until a couple of weeks ago were holding a record net short position. World Weather Inc. said the Southern Oscillation Index (SOI) has been strongly positive for the past couple of weeks, favoring the lingering La Nina conditions. They added that weakening has begun and will likely occur steadily over the next week to ten days, diminishing the La Nina influence which could offer some change in weather for various places around the world in April. The question is how long neutral conditions will last and how quickly El Nino will evolve and how strong it could be. A strong El Nino could cause problems with monsoon rainfall in India.

COTTON

May Cotton fell to its lowest level since Monday but stayed in the  upper half of that day’s big breakout rally. Brent crude oil prices were sharply higher overnight after Iran attacked energy facilities across the Middle East overnight. This raises the cost for man-made fibers, which is supportive for cotton. Polyester staple fiber futures on the Zhengzhou Commodity Exchange have risen more than 26% since the Iran war began. Extreme heat and dry conditions over much of the US cotton growing are raising concerns about this year’s crop. World Weather Inc says no rain is expected in West or South Texas through the end of this month. Dryland production areas may not get planted without some significant rain soon. Water supply is still favorable for the irrigated crops.

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