Cotton Eases on Forecast Shift

COTTON

July Cotton sold off sharply early Thursday after reaching new contract highs the previous session. Dry conditions across most of US cotton growing areas have been the main reason for the rally. As of a week ago Tuesday, the US drought monitor indicated that an area representing 98% of US cotton production was experiencing drought. The Delta and the southeast have received some rain recently, but World Weather Inc. says they need more. The biggest growing area, West Texas, has not gotten much relief. Their rainfall is expected to be minimal for another week and then showers and thunderstorms may start to pop up periodically. However, the 6-10 and 8-14 day forecasts show above normal chances of rainfall across the US cotton belt, with the biggest chances in Texas. The forecasts also show near normal temperatures for Texas and above normal in the Delta and southeast. Too much heat will limit the benefits of increased rain. The trade is looking for some sort of agreement on Chinese purchases of US agricultural products to come out of the Trump/Xi meetings  this week.

COCOA

July Cocoa was unchanged to higher early Thursday following a steep selloff on Wednesday. The market has been consolidating this week following a move to 3 ½ moth highs last week. It has found support recently from forecasts for a “Super El Nino” event expected to arrive in June that could affect production late in the 2026/27 main crop, as well as from worries about high fertilizer costs stemming from the closure of the Strait of Hormuz. Reuters reported yesterday that dealers said there had been a pickup in origin selling following the recent run-up in prices. Ivory Coast farmers have complained about dry conditions recently. World Weather Inc. said that rain is expected to reach all of west-central Africa’s cocoa areas multiple times over the next week with mostly of light showers with some areas seeing heavier amounts. The distribution is expected to greatly. ICE cocoa stocks increased by 2,441 bags on Wednesday to 2.660 million after falling to their lowest level since May 1 on Tuesday.

COFFEE

May Coffee has been in a choppy pattern of late, having bounced off a nine-month low on Monday but apparently rejecting a brief bounce to a one-week high on Wednesday. The Brazilian arabica harvest is approaching, and it is expected to be quite large, so it is difficult for the market to build upside momentum. Sellers have been reluctant given tight old crop supplies and the steady increase in the Brazilian currency, the real. But the real’s sharp selloff on Wednesday could increase the incentive for producers and exporters to price their new crop. Prior to its decline, the real had reached its highest level in two years. ICE certified arabica stocks increased by 154 bags on Wednesday to 471,985 after falling to their lowest level since February 26 on Tuesday. The amount pending grading fell by 5,035 bags to 3,390, the lowest since October 31, which may be lending some support. Higher fertilizer prices and the expected arrival of El Nino in June also create uncertainty for next year’s output.

SUGAR

July Sugar reached its highest level since May 5 early Thursday before turning lower on the day. The market managed to close a gap form the open on May 6 on Wednesday, and that may have satisfied the bulls for now. The failure to take out the May 5 high may have also been a disappointment, as well as the slightly lower crude oil prices overnight. Rabobank said a wetter outlook in the two-week forecast could slow the cane harvest in Brazil. On Wednesday, Datagro forecast a global sugar deficit of 3.17 million metric tons in 2026/27 versus a previous forecast of 2.26 million. They look for Brazil’s Center-South production to come in at 40.98 million tons, +1.4% from 2025/26, with sugar’s share of cane crushing expected at 48.5% versus 50.4% in 2025/26. However, they maintained that sugar is more profitable than ethanol at this point, and that crushers could shift more production to sugar if Petrobras doesn’t revise gasoline prices higher. Datagro also put 2026/27 Indian production at 27 million tons in 2026/27, down from 28.3 million in 2025/26, due to El Niño. Thailand production is expected at 10.3 million tons, down from 12 million in 2025/26.

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