Brazil Sugar Output Up, Ethanol Gains

SUGAR

The UNICA update on Brazilian Center-South sugar production for the second half of September will be released this morning, and a survey of analysts conducted by S&P Global has it coming in around 3.05 million metric tons, which would be up 7.7% from the same period last year. This would put cumulative production for 2025/26 up 0.6% from last year. A report from Valor International Sugar that sugarcane mills in Brazil’s center-south region have started prioritizing ethanol production and reducing sugar production. They added that the shift in the production mix toward ethanol had already been occurring in recent months but gained momentum in October. The last UNICA report showed 53% of the center south cane crush was going towards sugar during the first half of September versus 48% for the same period last year. We will see of this shows up in the UNICA report today.

COTTON

December Cotton is lower this morning but well above Tuesday’s contract low. The market saw a bit of a rally on short covering and possibly on ideas it had gotten oversold. In previous selloffs this year, buyers have emerged to provide a temporary lift to the market. However, the trade seems resolved that the 60-cent level will be the next target, quite a bit lower than Tuesday’s low at 62.71. The trade may still be holding out on  hopes of a positive outcome if and when President Trump meets with  Chinese leader Xi in South Korea in late October. The lack of updates on US crop conditions and export sales leaves the market with the most recent bearish trends, but after two weeks the lack of news may keep prices chopping around and more dependent on currency moves and stock market action. World Weather Inc says West Texas precipitation will be limited over the next week, and if rain evolves next week it should be brief and light enough to limit the impact on open boll cotton.  Weekly US drought monitor updates have continued through the shutdown, and this week’s report showed that as of October 16, approximately 62% of US production was in an area experiencing drought, down from 63% the previous week but up from 41% on September 16 and 5% on August 12. Drought is not appearing in West Texas, but it is in the northern Delta and much of the Southeast, from Georgia to North Carolina. Dry conditions are generally better this time of year because rains can cause problems with fiber quality and slow harvest. However, the rapid expansion in drought over the past two months, first in the Delta and then in the Southeast, may manifest in lower production totals overall.

COFFEE

December Coffee is higher this morning after backing off from a four-week high yesterday. Brazil’s Foreign Affairs Minister Mauro Vieira is to meet with US Secretary of State Marco Rubio today, and perhaps find a solution to the impasse in the 50% tariffs on Brazilian imports. Those tariffs have helped drain ICE coffee stocks, which fell another 2,250 bags yesterday to 494,558, which is their lowest since March 18, 2024 and has been one of the factors driving the market to new contract highs. But as Rabobank pointed out yesterday the large global surplus is expected for 2026/27, will depend on normal weather, which has not necessarily been the case so far for Brazil. Their rainy season is off to a slow start, and traders are starting to get more focused on the need for timely rains for flowering and pollination. World Weather Inc. says a “very important” rain event is expected to push from Parana to Bahia Friday through Monday (which includes Minas Gerais). The resulting rainfall is expect to be sufficient to bolster soil moisture and cover crop needs, but drier weather is expected to return later this month.

COCOA

December Cocoa is higher this morning after European third-quarter cocoa grind data came in with a smaller decline from year ago relative to the second-quarter numbers that were released in July. Asia and North American grinds are expected to be released later today. European third quarter grind came in at 337,353 metric tons, down 4.8% from the same period last year. This was the lowest for the quarter in 11 years (since 2015), which was in line with expectations from a Bloomberg survey calling for it to be the lowest in at least a decade. It was also up from 331,762 in the second quarter, which was down 7.2% from a year ago. Grind typically increases from the second to the third quarters. Germany’s third quarter cocoa grind fell 5.5% on the year to 94,882 metric tons, according to the German confectionery industry association BDSI said on Thursday. Germany’s second quarter grind had fallen 17.1% on the year to 84,280 metric tons. Malaysian third-quarter grindings totaled 60,780 metric tons, down 13% from the second quarter and down 35% from year ago. Cumulative grindings for 2025 have reached 215,169  tons, down 24% from last year. Brazilian grindings totaled 46,100 tons, down 17% from last year. Cumulative grindings were 144,400 tons, down 15% from last year. According to that Bloomberg survey, Asia’s third  quarter grind is expected to reach an eight year low. (The lowest in eight years is 189,407 from 2017), and the North American grind is expected to be the lowest in at least two years (97,881 tons from 2023).

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