March Cotton Lower Overnight

COTTON

March Cotton was lower again overnight, as the market left behind ideas of short covering ahead of today’s USDA supply/demand report. For the report, the trade seems to be anticipating a slight tightening in US and global supply. A Bloomberg survey shows an average trade expectation for US 2024/25 cotton production at 14.09 million bales with a range of 13.90 to 14.25 million. This would be down from 14.19 million in the November update. Exports are expected at 11.26 million bales (range 11.10-11.40) versus 11.30 in November, and endings stocks are expected at 4.23 million bales (range 4.01-4.50 million) versus 4.30 million in November.. As of last week, cumulative US export sales for the 2024/25 marketing year had reached only 65% of the USDA forecast versus a five-year average of 73% for this time of year, which leaves open the possibility of a reduction in the export forecast. World 2024/25 production is expected at 116.18 million bales, which would be unchanged from November, with consumption at 115.33 million, up from 115.22 million and ending stocks at 75.65 million down from 75.75 million. Recent rain in Australia’s eastern dryland crop region of New South Wales and Queensland has improved planting, emergence and establishment conditions. Rain in northern Argentina periodically through the coming two weeks will be good for cotton planting, emergence and establishment.

SUGAR

March Sugar is sharply lower this morning and appears ready to test the low end of a downward sloping channel in place since September. Farmers and other industry representatives told Reuters that India is likely to produce a record amount of sugar in the 2005/26 marketing year after plantings and cultivation increased sharply this year due to ample water supply and declining prices of competing crops. This would follow two years in which the supplies were so tight that Indian government restricted exports due to tight supplies. This would not alleviate their current tight supply situation. The Indian Mills Association is estimating that in 2024/25 production will fall to 28 million metric tons, which would be below their domestic consumption of 29.6 million. Citi analysts said they expect prices to rebound, citing a negative outlook for the next Brazilian crop and a tight global supply balance. The drought this year has lowered expectations for the 2025 crop. Recent heavy rains may have improved the outlook somewhat, but considerable damage was done from the extreme conditions, that also sparked wildfires that hit cane fields.

COCOA

March Cocoa traded to a another new contract high overnight, as concerns about the West African crop dominate market action. There is now talk of a possible fourth consecutive global production deficit for 2024/25. Ivory Coast farmers said that a prolonged dry spell could tighten the supply of the main crop from February, as dry weather now implies low harvesting in February and March. They expect the dry conditions to intensify this month as the dry season sets in, with the Harmattan winds expected to come down from the Sahara. Farmers also said the number of large pods on the trees is diminishing, which points to a slowdown in production. Ivory Coast arrivals are still strong relative to a year ago, but they are starting to come off their peak levels. Cumulative arrivals are just above the five-year average. World Weather Service reported very little rain for West Africa over the past 24 hours and that it was confined to a small section of the coast, missing key cocoa growing areas. This patten is expected to continue over the next week or 10 days. The newly elected president of Ghana has promised to distribute free fertilizer, improve the management of Cocobod, and combat illegal mining and smuggling.

COFFEE

March Coffee gapped higher overnight to new contract highs as well new all-time highs for the nearby contract. Volcafe, one of the world’s largest coffee traders, has cut its 2025/26 Brazil arabica forecast by 11 million bags to 34.4 million, citing drought and blossom failure. They also expect the global market to record an unprecedented fifth consecutive deficit in 2025/26 of 8.5 million bags. Cecafe said Brazil exported 4.29 million bags of green coffee in November, up 2.7% from a year ago. This brought their cumulative exports for 2024 to 42.7 million bags, already surpassing in the previous record for an entire year of 40.6 million from 2020. Arabica exports in November totaled 7.8 million bags, were up 9% from the previous year. Robusta exports totaled 714,000, down 21%. Their October exports were a record 4.57 million. Soaring margin calls have reportedly sparked short covering and the hedge lifting out of Brazil. Recent heavy rainfall in Brazil is believed to be too late to help the 2025 crop. Recent rainfall in the Central Highlands of Vietnam could disrupt some of the harvest.

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