SUGAR
March Sugar sold off sharply overnight on reports that India may lift its restrictions on sugar exports, this according to ET Now which cited government sources. India has banned mills from exporting sugar since October 2023 in an attempt to keep domestic prices down after a drought had reduced output. They government has been reluctant to lift the ban as it is also interested in boosting ethanol production. Shares of Indian sugar companies jumped 3%-7% on the news overnight. We look for the UNICA update on Brazil Center-South sugar production for the second half of December to be released this week. (These reports usually comes just ahead of mid-month and just ahead of month’s end.0 The last report showed that as of December 16, cumulative sugar production was running 5.1% below a year ago, and ethanol production was running 3.3% higher. Sugar’s share of cane crush fell to 36% during the period, and ethanol’s share rose to 64%. The trade has been expecting production to fall off as the rainy season sets in, and so far it has not been surprised. The rains have improved the outlook for 2025 production. Europe’s largest sugar producer, Suedzucker, posted an operating loss in the third quarter of its 2024/25 fiscal year (ending November), on falling prices and market turbulence following the war in Ukraine. The reported a loss of 33 million euros, down from a profit of 268 million the previous year. The blamed the EU permitting extra sugar exports from Ukraine. Ukraine exported about 495,000 tons to EU in 2023. Exports were restricted to 263,000 in 2024 and to 109,000 in the first five months of 2025.
COCOA
March Cocoa was higher overnight, perhaps buoyed by strong sales growth for Swiss chocolate maker Lindt & Spruengli. The company raised its 2024 margin estimate, and it forecast further sales growth in 2025 after reporting 7.8% organic growth for last year. Sales were 5.47 billion Swiss francs versus an average forecast of 5.49 billion. The bulls see the sales growth as an indication that price hikes have not deterred shoppers from splurging on chocolates. Fourth quarter grind numbers from Europe, North America and Asia scheduled for Thursday could grab the market’s attention for the next couple of sessions. With cocoa prices rising to new all-time highs in late 2024 following previous rallies in April and in late 2023, chocolate manufacturers are facing a cost crunch. Third quarter results showed European grind -3.3% from a year ago and the 12-month total -1%. Asia was +2.6% from a year ago, and the 12-month total was -2%. North America grind was +11.6% from a year ago, and the 12-month total was +3.5%. With nearby +51% during the fourth quarter, traders are on the lookout for a drop in grind ago. Ivory Coast farmers interviewed by Reuters said they are worried that the persistent lack of rain could weigh on the April-June crop. They expect harvesting in February and March to be tight, as the drought could reduce yields on cocoa trees and dry the first flowers and young cocoa pods (known as cherelles). West Africa is in its dry season. The extent of the dryness varies from region to region, but there are concerns that things have gotten too dry. ICE certified cocoa stocks fell 10,726 bags yesterday to 1.305 million, their lowest since December 2003.
COFFEE
March Coffee saw a strong rally yesterday, but it closed well off its highs of the day, which may hold the market for a bit. The trade is concerned that the extreme drought and heat in Brazil last year will hurt 2025 production, but a generally wet pattern over the past few months has improved the outlook. Yesterday’s Commitments of Traders Report showed managed money traders were net buyers of 1,469 contracts of coffee for the week ending January 7, increasing their net long to 57,910. This is within the vicinity of the record net long of 71,811 from last April, which leaves the market vulnerable to long liquidation if support levels are taken out. ICE arabica stocks increased 2,020 bags yesterday to 979,130. This was the first daily increase in a week. Stocks were down 14,432 from where they were on January 6.
COTTON
March Cotton edged higher overnight following a recovery rally yesterday from new contract lows. The market drew support yesterday from a strong rally in the energy markets, as high crude prices increase the cost of man-made fibers. The cotton market may have also gotten oversold after its selloff in the wake of the USDA supply/demand report on Friday, which showed a surprise increase in US and world production for 2024/25. The strong dollar has been a negative factor for cotton, as it makes US exports less competitive on the global market. It was lower overnight after reaching its highest level since November 2022 yesterday. The Commitments of Traders Report showed managed money traders were net buyers of 341 contracts of cotton for the week ending January 7, reducing their net short to 39,342. This is up from the record net short of 52,024 from last August, which suggests there is room for more selling if funds get active.
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