COTTON
March Cotton was sharply lower overnight in the wake of the new tariff announcements on imports from Canada, Mexico, and China. The dollar is sharply higher this morning, which makes US cotton less competitive on the world market, and the stock markets are sharply lower, which is not supportive to cotton demand in general. Traders are also concerned about retaliation from China and Mexico, which are both important buyers of US cotton. As of last week, China and Mexico were the fourth and fifth largest buyers of US cotton in terms of total commitments for the 2024/25 marketing year. Sales to China had reached 693,000 bales or 8% of total US sales, and Mexico 614,000, 7% of the total. This is down from recent years, as Brazil has already taken a larger share of global trade this year. But of the US sales this year, China has 221,000 bales outstanding and Mexico has 352,000; this is cotton that sold but not yet delivered.
SUGAR
March Sugar is lower this morning but remains inside last Monday’s wide range. The market is consolidating its bounce off 22-month lows the previous week that came after US cane producing areas suffered extreme cold that threatened this year’s crop. In Brazil, ample rains over the past couple of months have improved the outlook for their upcoming crop after record heat and drought last year that culminated in wildfires that severely damaged cane fields. Brazilian sugar output has seen a seasonal slowdown over the past several weeks, and 2024/25 sugar production has fallen below year ago levels. Both Brazil and India appear to be focusing more on ethanol production and less on sugar these days. The dollar is sharply higher this morning in the wake of the tariff announcement, and if this translates to a weaker Brazilian real, it may bring more aggressive selling by Brazilian mills. The real traded to its highest level in two months last week, and momentum indicators suggest it is short-term overbought.
COFFEE
March Coffee extend the rally overnight to trade to a new all-time high for the eighth straight session. Some analysts are saying Brazil’s coffee crop may not be as bad as some have feared, given the ample rain over the past couple of months, but that is not borne out by market action. The question remains whether the rains have come in time to do much good, as it is believed that the historic drought last year has deprived coffee trees of the energy needed to produce a strong crop. Some have speculated the rains will produce larger cherries. The crop is expected to be down from last year, as this is the arabica crop’s off year and it clearly got off to a weak start. ICE certified arabica stocks fell 18,304 bags on Friday to 867,582, their lowest since November 12. The number of bags pending review increased by 14,540 on Friday to 92,495, their highest since December 13.
COCOA
March Cocoa has found support after bouncing off a two-week low on Friday. Ivory Coast cocoa arrivals totaled 47,000 metric tons for the week ending February 2, down from 52,000 the previous week but up from 43,000 for the same period a year ago. The five-year average for the week is 57,700 tons. Cumulative arrivals for the 2024/25 marketing year have reached 1.290 million tons, up from 1.051 million a year ago but below the five year average of 1.371 million. A spokesman for Lindt said they expect any effects of the US tariffs to be very limited given that the vast majority of its products sold in the US are produced domestically. North America is the company’s second largest market. ICE stocks rose 13,304 bags on Friday to 1.377 million, the highest they had been since December 26. Stocks increased 113,578 bags last week. Last month also marked the first monthly increase in ICE stocks in a year. World Weather Service said there were scattered showers and thunderstorms over the weekend from coastal areas of Ivory Coast through far southern Ghana to southern Benin. Rainfall was mostly light to locally moderate. A few cocoa areas benefited from the moisture, but most production areas are farther north and were not impacted. Additional showers and thunderstorms are likely periodically near the coast this week and some may advance a little farther to the north next week and increase in frequency. This is the time of year in which seasonal rains usually resume. The moisture would bring some relief from the warm to hot temperatures that have been prevailing in recent weeks. Next week’s rain may be a little more meaningful.
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