Mar Sugar Extends Selloff Overnight

SUGAR

March Sugar collapsed yesterday to its lowest levels since September 17 and extended its selloff overnight. The Brazilian real has fallen to its lowest level in almost two years, which increases the incentive for Brazilian producers to sell sugar on the world market. The market has been under pressure since last week’s UNICA report showed an increase in Brazil’s Center South production for the second half of November. The trade has been expecting production to decline sharply as the season progressed because of the dry conditions earlier in the year, and the first half November report fulfilled expectations, so the recovery in the second half of the month caught the market by surprise. A wetter pattern over the past couple of months has improved the outlook for 2025. Hedgepoint Global Markets said yesterday that Thailand’s harvest has improved in both rhythm and yield.

sugar cane

COFFEE

March Coffee was higher overnight, as it attempted to fill the gap from last Tuesday at 334.15. The market is consolidating last week’s move to all time highs, and filling that gap may encourage a retest of that level. Failing to do so could lead to disappointment. Technical indicators show a loss of momentum on the latest move. The market rallied last week on a sharp reduction in one trading firm’s forecast for Brazil’s 2025 arabica crop, but that adjustment is seen by others as extreme. There are expectations that the drought this year left trees in poor condition to produce a strong crop, but decent rainfall is viewed as favorable to cherry development. Some traders also expressed ideas that high prices are an incentive to maximize whatever potential remains.

COCOA

March Cocoa pushed above the psychologically important $12,000 level overnight, leaving the all-time high from April at $12,261 in its sights. Seasonally dry weather in West Africa has the market concerned that the mid-crop will not be enough to replenish supply after three years of global production deficits. West Africa received no rainfall over the past 24 hours, continuing the recent trend, and World Weather Service sees little change over the next 7-10 days. Dry conditions now mean lower output in February-March. There is also chatter about the dry Harmattan Wind, which comes down from the Sahara at this time of year, as a strong one would make matters worse. Ivory Coast arrivals are running ahead of a year ago, but they behind the five-year average for this point in the season. ICE certified cocoa stocks fell 11,753 yesterday to 10.405 million, the lowest since December 2003. Stocks have declined every day but one since October 10.

COTTON

March Cotton fell below the November low overnight to within striking distance of the contract low of 67.90 from August. The market cannot get past the dismal demand outlook, particularly for exports. Previous breaks have attracted buyers. The Dollar Index is holding near two-year highs, which make US exports less attractive on the world market. The FOMC meeting results this afternoon are expected to bring a rate cut of 0.25%. However, the trade is also concerned that recent upticks in inflationary readings may postpone any further cuts, which would be supportive to the dollar and could put further pressure on cotton. Last week’s export sales report showed net sales of 156,333 bales of cotton for the week ending December 5, which was the lowest since November 7 and the second lowest since October 3. Cumulative sales are have reached 66% of the USDA forecast for the marketing year, which is the slowest pace relative to expectations in at least six years. Cumulative sales overall are the lowest since 2015.

 

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