Cocoa Market Assesses Rally

COCOA

March Cocoa is lower this morning, as the market assesses the recent rally off concerns about west African weather. Conditions remain dry across the region, which is typical for this time of year. Farmers interviewed by Reuters said the Harmattan wind was blowing hard last week when rains were mainly below average. They worry that if the winds remain strong and there is no rain, leaves would turn brown and harm the trees. However, other areas reported good growing conditions. World Weather Service expects very little change in the pattern through the next week or so. Ivory Coast arrivals are running well ahead of a year ago but below the five-year average. ICE certified stocks fell 6,437 bags yesterday to 1.380 million, the lowest in 20 years.

cocoa pods opened

COFFEE

March Coffee was near unchanged overnight, as the market worked on consolidating the recent move to all-time highs. Technical divergence with momentum indicators on the recent rally may have traders expecting a more substantial correction. The market’s primary focus has been on Brazil’s upcoming crop. The question is whether the degree to which the wet weather key coffee growing have been experiencing recently areas will be in time enough to support the 2025 crop. Safras & Mercado said last week that they expect Brazil’s arabica production at 38.35 million bags versus a forecast from Volcafe earlier this month at 34.4 million that sent the market its highs.

COTTON

March Cotton was slightly lower overnight following yesterday’s sharp rally. The market fell to new contract lows on Friday, but the low prices apparently brought in buyers. The dollar sold off on Friday after reaching a two year high, and the prospect of a possible near term top to may have eased anxiety over the poor pace of exports. However, the dollar has not followed through on Friday’s decline. Export sales improved slightly last week after some disappointing numbers the previous two weeks, but at 201,759 bales, they were not as impressive as the 300,000+ plus that were seen for a couple of weeks in November. The Brazilian real fell yesterday after a one-day recovery on Friday, and the weaker currency incentivizes Brazilian growers to sell for export.

 SUGAR

March Sugar is slightly higher this morning as it tries to build a base following last week’s selloff to its lowest level in three-months. The market received some bullish news over the weekend from declining yield expectations in India that their production could come up short of domestic consumption this year. This  news implies that instead of being next exporters this year, they could be importers. World Weather Service says waves of rain are slated for center Brazil in the coming weeks as a La Nina-like weather pattern evolves for the country. They noted that these areas are already saturated and will receive several more inches of rain this week. The threat for flooding will increase and may damage some crops. Wet weather diseases will be a growing concern, as will the need for replanting if severe flooding occurs. Overall, production potentials will remain relatively favorable, though the need for drier weather will increase toward mid-January. This situation may be a bigger concern for grains than for sugar, but it bears watching. The heavy rains will slow cane harvest and crushing, but they may also recharge field for next year’s crop, which officially begins in April.

 

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