Strong Real Supports Coffee

COFFEE

July Coffee was higher early Tuesday as it continued chopping around inside a two-month range. The upcoming Brazilian crop may be keeping a lid on the market, but the Brazilian real has reached its highest level since March 2024, which lowers the incentive to sell for export. ICE certified stocks decreased by 3,198  bags on Monday to 499,036. Brazil could experience net drying conditions this week with some brief cooling late in the week, but there is no risk of crop damaging cold. Over the past six weeks there have been at least four occasions when sharp breaks were met with buyers.

COCOA

July Cocoa was higher early Tuesday following a breakout rally on Monday, and the market has now reached its highest level since February 10. Ivory Coast port arrivals were estimated at 24,000 metric tons last week, down from 28,000 the previous week and 31,000 for the same week a year ago. Cumulative arrivals since the marketing year began on October 1 have reached 1.534 million tons, down 0.1% from this point last year. The drop in arrivals last week may have put some doubt into the expectations for a strong mid-crop this year.  Ivory Coast farmers interviewed by Reuters said below normal average rainfall in most of the nation’s cocoa-growing region last week threatened the development of cocoa to be harvested towards the end of the March-August mid-crop. They blamed a lack of sufficient moisture that could lead to a tightness of supply in the final months of the crop. The also said the very hot conditions could jeopardize small pods if there are no abundant rains before mid-May. However, World Weather Inc. does expect routinely occurring rain and thunderstorm activity daily through the next week.  There were reports that traders may have also been concerned that El Nino will have a negative effect on Ecuador’s upcoming crop

COTTON

July Cotton was higher early Tuesday but inside Monday’s range. The market is being supported by high crude oil prices, which raise the cost of polyester, higher fertilizer costs, and the drought conditions covering roughly 98% of US cotton producing areas. However, after a 19-cent rally since the beginning of March, the trade is suspecting that planted area will be higher than the 9.64 million acres from the prospective plantings report. The weekly Crop Progress report released yesterday afternoon Texas plantings are ahead of the average pace, the Delta is way ahead, and the southeast is behind. The report showed 21% of the US cotton crop was planted as of May 3, up from 16% the previous week and 20% a year ago. The five-year average for this date is 19%. Texas was 24% planted versus a five-year average of 22%. Georgia was 11% planted versus 14% on average, Arkansas was 25% versus 17% on average, and Mississippi was 30% planted versus 17% on average. Eastern Texas, the Delta, and much of the Southeastern US are expected to see rain/thunderstorms Wednesday/Thursday. This could provide relief, especially to the southeast. West Texas looks dry. It saw some rain over the weekend, but it needs more.

SUGAR

July Sugar was higher early Tuesday, extending its rally to its highest level since April 2. Last week, the Australian sugar analysis firm Green Pool raised its projected global sugar deficit for 2026/27 to 4.33 million metric tons from a previous estimate of 1.66 million. This is part of a pattern of tightening supply expectations due to 1) higher crude oil and gasoline prices globally, which will encourage Brazil to crush more cane for ethanol at the expense of sugar output, 2) reduced monsoon prospects for India and Thailand due to El Nino, and 3) reductions in India’s 2025/26 output, which lowers the beginning stocks for 2026/27. Last week Brazil’s president said the nation will increase the ethanol mix in gasoline to 32% from the previous 30%, supporting higher ethanol production. The Brazilian real has reached its highest level since March 2024, which encourages domestic consumption (in the form of ethanol) and reduces the incentive to export (in the form of sugar). The University of Sao Paulo’s research center CEPEA said in a note on Monday that sales of hydrous ethanol in Sao Paulo, Brazil’s largest fuel market, increased 25% in April from a year earlier. The upcoming El Nino event has the potential to disrupt production, but the effects may not be felt until 2027.

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