Cotton Hits 2024 Highs

COTTON

July cotton reached its the highest since July 2024 early Friday, with the market drawing support from drought in the US and higher energy prices. China’s agriculture ministry raised its 2025/26 cotton consumption outlook by 200,000 metric tons to 7.8 million, crediting higher energy costs that make synthetic fibers more expensive.  They added that demand has been supported by active purchases by textile firms during the peak demand season. The weekly US Drought Monitor showed an area representing about 95% of US cotton production was affected by drought as of April 7, up from 94% the previous week and 21% a year ago. Texas had 97% of its production in drought. The US Climate Prediction Center has given El Nino a 61% chance of developing between May and June persisting through at least the end the year. They added that El Nino–Southern Oscillation (ENSO) neutral conditions are present and are favored through April to June 2026. The switch to neutral conditions could bring much-needed moisture to Texas. The 6-10 and 8-14 day forecast show above normal chances of rain through April 23. The 1-5 day outlook has up to an 1.5 inches in west Texas. El Nino bring drier than normal conditions to cotton growing areas in India and eastern Australia.

COCOA

May Cocoa was higher overnight, perhaps on news that Ivory Coast’s cocoa regulator (CCC) and a farmers’ umbrella organization (OIA) have agreed to buy back 23,830 metric tons of cocoa beans to close out the stock crisis that had left producers unable to sell their beans earlier this year, as that may allow the market to put aside worries about overhanging old crop supply. Current conditions point to a strong mid-crop out of west Africa. However, the US Climate Prediction Center said on Thursday that El Nino has a 61% chance of developing between May and June and is expected to persist through at least the end of the year, which is sooner than previous expectations for a late-summer arrival. El Nino can bring dry conditions to west Africa and extreme rain events or flooding to Ecuador. First-quarter grind data is due to be released on April 16, and dealers have told Reuters they look for Europe’s grind to be down 2% to 4% and North America’s down 10% to 12% from last year. A higher than expected grind would suggest the demand recovery is coming faster than anticipated.

SUGAR

May Sugar extended its selloff early Friday, to fall to its lowest level since March 6. The market has now fallen 2.62 cents (-16%) from its March 30 high.  The rally in March apparently allowed producers to place hedges. It also came with  significant short covering on the part of the funds. Higher energy costs increase the incentive to produce ethanol from cane instead of sugar, but that impetus was already underway when sugar prices fell to five-year lows earlier this year. The reopening of the Strait might boost raw sugar sales in the near term, but that situation remains tentative. The US Climate Prediction Center has given El Nino has a 61% chance of developing between May and June, and it expects it to persist through at least the end of 2026. The timeline appears to have been moved up from previous expectations for a late-summer arrival, which raises the threat of below normal monsoon conditions for India. India in the meantime has left its export quotas unchanged despite some revisions lower in the 2025/26 production forecast.

COFFEE

May Coffee was near unchanged early Friday and was holding most of the gains from its initial rally of the cease-fire proposal. There had been some commentary that the closure of the Strait of Hurmuz was detrimental to coffee demand because that region of the world had been considered a growth area. The strong crop expected out of Brazil this year is a major factor, and that harvest is expected to begin next month. Uganda exported 651,933 bags of coffee bean in February, up 17.3% from the same period last year. Uganda is Africa’s largest coffee exporter, followed by Ethiopia. The CPC has given El Nino a 61% chance to develop between May and June, which his sooner than previous expectations for a late-summer arrival. These events have a tendency to bring drier conditions to many coffee producing regions, including Colombia, Africa, and Indonesia.

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