Brazil Rains Slow Harvest

SUGAR

March Sugar extended Friday’s rally overnight but came short of taking out technical resistance at the 100-day moving average (21.96). The market is back in the upper half of a downward sloping channel that could end up being a bull flag. Rainfall in the Center-South Brazil through Wednesday are expecting to bring 3.00 to 8.00 inches, with a few greater amounts possible. This could result in some flooding. The wettest areas include southern Sao Paulo, a key cane growing region. The rains may ease concerns about the 2025 crop, but they could also bring harvest activity to a halt until 2025. Recent bullish production data out of Brazil has failed to spark a rally capable of taking out the upper end of the channel. Higher crude oil prices and a more optimistic economic tone from China could help.

sugar cane

COCOA

March Cocoa is near unchanged this morning following another breakout rally on Friday that took the March contract above $10,000 for the first time. Ivory Coast port arrivals totaled 85,000 for the week ending Sunday, down from 92,000 the previous week. This was up from 64,000 for the same period the last year but below the five-year average of 87,000. This brings the total arrivals since the marketing year began on October 1 to 820,000 tons, up from 612,000 a year above the five year average of 817,200. This fact that arrivals have fallen below the average may reinforce concerns that the harvest will rapidly slow down. The arrivals paces tends to peak this time of year. West Africa dryness continues. This is not unusual, as the area has entered its dry season, but it also suggest that the harvest will end early and that this year’s output will not be as strong as previously hoped. In the coming weeks we can expect to hear about the dry Harmattan winds  that come down from the Sahara this time of year. On Friday, an investment fund report said the global cocoa market would see a deficit of 160,000-200,000 metric tons in 2024/25, which would make it the fourth straight year of deficits. The deficit for 2023/24 was 478,000 tons, versus 64,000 in 2022/23 and 216,000 in 2021/22.

COFFEE

March Coffee appears ready to test the November 29 contract high at 335.45 today. The state of Brazil’s upcoming crop has been the key factor behind the recent rally, as traders are concerned that the extended drought this year has left the trees in a low-productivity state. Local traders in Brazil said farmers had sold most of their current stocks and were holding what was left. The Brazilian real was back approaching its historic lows on Friday. A move like that would normally encourage farmer selling, and the initial break last week sparked a selloff in coffee, but if the farmers are truly sold out, that may not be a factor. The Central Highlands of Vietnam saw some rain over the weekend, and more is possible this week, which may disrupt some of the harvest.

COTTON

March Cotton is higher this morning and appears to be drawing strength from a rally in crude oil. The market sold off at the end of last week in the wake of a disappointing export sales report, but short covering may have emerged ahead of the USDA supply/demand report tomorrow. Indications that China is ready to ease monetary policy for the first time in 14 years may also be supporting global demand expectations. For the USDA report, the trade seems to be anticipating a slight tightening in US and global supply. A Bloomberg survey shows an average trade expectation for US 2024/25 cotton production at 14.09 million bales with a range of 13.90 to 14.25 million. This would be down from 14.19 million in the November update. Exports are expected at 11.26 million bales (range 11.10-11.40) versus 11.30 in November, and endings stocks are expected at 4.23 million bales (range 4.01-4.50 million) versus 4.30 million in November. World 2024/25 production is expected at 116.18 million bales, which would be unchanged from November, with consumption at 115.33 million, up from 115.22 million and ending stocks at 75.65 million down from 75.75 million.

 

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