Cocoa Surges on Fertilizer Fears

COCOA

July Cocoa was sharply higher again early Thursday, reaching its highest level since January 29. The trade appears to have turned positive on the market on concerns that high fertilizer prices due to the closure of the Strait of Hormuz will lower global production in the coming year. The last time fertilizer prices surged was in the wake of the start of the Russian/Ukraine war, and that event coupled with poor growing weather resulted in a sharp drop in production, especially in West Africa, that eventually saw cocoa prices reach all-time highs. The expected arrival of El Nino as early as next month is also raising concerns about production, though the effects may not be felt until the 2027 main crop. The west African mid-crop is expected to be strong, but some of that optimism may have diminished with the drop in Ivory Coast arrivals. Reports that Ghana’s farmers have yet to be paid for 2025 sales raises additional concerns about their ability to purchase inputs for upcoming harvests.

COTTON

July Cotton was lower this morning, facing renewed pressure from lower crude oil prices that lower the cost of producing polyester. That has been one of the factors supporting the sharp, 20-cent rally over the past two months. The other factor has been the drought covering most of the US cotton growing region, but that has started to see some relief. World Weather Inc. said on Wednesday that portions of the Delta and Tennessee River Basin received significant rain in the past week to ten days, easing drought and improving crop and field conditions. However, the region still has some notable moisture deficits. Additional rain is predicted in the coming week. The southeastern states need more moisture despite seeing some needed this past weekend. West Texas also needs more rain. The drought is not over, but rain seems to be arriving just in time.

COFFEE

July Coffee was lower early Thursday and was back near the low end of the month-long range as well as in the vicinity of an eight-month low from February. The market is expecting a strong Brazilian harvest to begin this month, which limits the upside. However, the Brazilian real reaching its highest level against the dollar in two years reduces the incentive for Brazilian growers and roasters to sell. Colombian coffee production totaled 697,000 bags in April, down from 754,000 in March and 703,000 a year ago, according to Colombia’s National Federation of Coffee Growers. The 12-month total has fallen to 12.406 million bags, down from 12.412 million the previous months and 14.954 million a year ago. This is the lowest the 12-month total has been since July 2024. April exports totaled 682,000 bags, down from 788,000 in March and 796,000 a year ago. The 12-month total exports fell to 11.729 million bags, own from 12.907 million a year ago and the lowest since August 2024. The head of the Federation said rains delayed harvest, particularly in the southern provinces.

SUGAR

July Sugar was slightly lower early Thursday in line with crude oil, which fell off continued optimism regarding the possibility that the US and Iran could come to some agreement to reopen the Strait of Hormuz. Lower crude oil prices reduce the incentive for sugar cane processors to produce ethanol, particularly in Brazil. However, Brazil is already moving towards higher ethanol production this year, and the Brazilian real reaching its highest level in two years limits the incentive to sell sugar for export. Two Indian government sources said on Wednesday that the nation has now no plans to curb sugar exports for now, despite lower output. Earlier this year, India lowered its forecast for 2025/26 production after untimely rains hit yields late in 2025. El Nino is expected to reduce monsoon rainfall this year, but the effects may be mitigated by conditions in the Arabian sea.

Interested in more futures markets?  Explore our Market Dashboards here.