Demand Outlook Supports Cocoa

COCOA

September Cocoa was higher again early Wednesday and was approaching its May 27 high. The market has taken a positive turn this week on renewed uncertainty over upcoming production and a slightly more bullish stance on demand. World Weather Inc. said routinely occurring showers and thunderstorms are expected through the next week to ten days in West Africa, bringing variable and sometimes very light rain at times.  All production areas will get some at one time or another, but a better distribution would be appreciated. Ecuador is expected to see heavy rains and possible over the next 7-10 days, which could impact cocoa production in the world’s second or third-largest producer. El Nino threatens to bring dry conditions to west Africa and Indonesia and too-wet conditions to Ecuador. Statements from Australia’s weather bureau that this year’s El Nino could intensify into one of the strongest in decades during the second half the year puts that issue back in the headlines. Demand is showing some improvement, with data from Ivory Coast exporters’ association GEPEX putting the nation’s May cocoa grind at 55.769 metric tons, up 39.7% from a year prior.

COFFEE

September Coffee was trading inside the upper portion of Tuesday’s breakout rally early Wednesday, as the market maintained support of ideas that excessive rain in Brazil is not only slowing the harvest, but it is also damaging the crop, especially in the wake of reports of recently harvested beans that had been left to dry in the sun but were soaked after three straight days of rain. There was also talk that if the rains were to continue, fungal diseases could develop that would affect tree health. World Weather Inc said it expects rains to continue to come and go over the next week to ten days.

SUGAR

October Sugar was higher early Wednesday, hovering near the upper end of Tuesday’s range after the market had fallen to its lowest level since April’s range on Tuesday. The market has extended its selloff this week with the collapse in crude oil prices, as that undermines support the market had received from expectations that high energy prices would encourage more ethanol production and less sugar production in Brazil. On the other hand, Brazilian sugar and ethanol producer Jalles Machado said that while it expects its sugarcane crushing to increase 10.2% in 2026/27 to 7.8 million metric tons, it sugar production is expected to fall by 4.2% to 418,100 tons and ethanol to increase 18% to 372,000 cubic meters. The company forecasts it will allocate 41% of its sugarcane to sugar production in the season, down from 46.4% in 2025/26. World Weather Inc. warned of serious flooding expected in U.S. Gulf Coast States over the next few days, which could put sugarcane at risk in flood prone, low-lying, areas. Flooding is expected to become serious in southern China as well, which could cause some losses to their cane output. India’s monsoon has started out poorly, and this trend will continue for another full week but it could see improvement in 2-3 weeks. Thailand continues too see drier than normal weather that will continue for a couple of weeks and eventually raise concerns about their cane crop.

COTTON

December Cotton extended its rally early Wednesday, reaching its highest level since June 4. Ongoing dry conditions in Texas and an improved demand outlook have lifted the market over the past week or so. World Weather Inc. expects West Texas to remain drier than usual for the next ten days. Some increase in shower and thunderstorm activity will be possible in the coming weekend and lingering into next week, but confidence is low for more than 0.30 to 1.25 inches. The dollar has pulled back this week after approaching the March highs, and this helps improves prospects for US cotton exports. A strong export sales report last week and an increase in US exports for 2025/26 in last week’s USDA supply/demand report have also boosted expectations.

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