Cotton Gives Back Portion of Gains

Late opens today for Cocoa, Coffee, Cotton and Sugar: 6:30 AM US Central time. London markets closed.

COCOA

March Cocoa closed higher on Tuesday after finding support at the 0.382 retracement of the December rally. As of Sunday, Ivory Coast cocoa arrivals were ahead of a year ago but behind the five-year average, and the drier than normal conditions of the past month or so have traders expecting a sharp slowdown in the new year. Farmers are still worried about the seasonal Harmattan wind, which can dry trees and lower production. ICE certified stocks increased 9,517 bags on Tuesday to 1.390 million, their biggest daily increase in months and only the second increase since mid-November.

COFFEE 

March Coffee closed near unchanged on Tuesday as the market continues to consolidate around record high levels. Perhaps high prices have brought in some sellers from Brazil. The Brazilian real was slightly higher on Tuesday but still near the all-time lows against the dollar from last week. A weak currency encourages producers to sell, but not if they think it will fall further. However, the real had an outside reversal day higher on Tuesday, which may have traders thinking it has put in a low, and this could encourage growers to sell more of their old crop. Cash trading in Vietnam was quiet for the holidays, but rains in the Central highlands reportedly are limiting the farmers’ ability to dry newly-harvested beans. Dealers reported that there are still 20%-30% of beans left on coffee plants. The trade is awaiting new evidence on Brazil’s upcoming crop after a mix of reports the past couple of weeks.

COTTON

March Cotton gave back a portion of their gains on Tuesday following a sharp, two-day rally off contract lows. Low prices attract buyers but rallies have been limited by the limited demand outlook for US cotton. The US dollar hanging around last week’s 25-month high, and Brazilian real is hovering around all-time lows, which  benefits Brazilian sellers and make US cotton less competitive on the global market. Data released by China’s National Bureau of Statistics late Tuesday put the nation’s 2024 calendar year cotton production at 6.164 million metric tons, which is up 9.7% from a year ago. Production particularly increased in Xinjiang, the main cotton growing region. Planted area was up 1.8% and yield per hectare was up 7.8%. China has seen good growing weather this year, so the increase is not a shock. The weekly exports sales report will be released tomorrow. Last week’s report showed a slight improvement over 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. Cumulative sales lowest for this time of year since 2015/16. Sales had reached 68% of the USDA forecast versus a five-year average of 76% for this point in the marketing year.

 SUGAR

March Sugar was near unchanged on Tuesday as the market failed to build on an attempted recovery from last week’s three month low. The news that triggered the selloff this month was as surprise increase in Brazilian Center-Soth production in the second half of November. First-half November production had a very steep decline, so it should not have been a total shock that there was an increase in the second half. Cumulative production for the 2024/25 marketing year has slipped below year ago levels. Recent improvement in Brazilian rains have improved the outlook for 2025/26 productions, but it will also slow harvest and crushing for 2024/25. Declining yield expectations for India have lent support on occasion.

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