Modest Rally on Bullish WASDE

COTTON

December Cotton bounced off a two-month low on Thursday on bullish export sales and USDA monthly supply/demand reports and extended those gains overnight, but the rally has been relatively modest so far. The market had gotten oversold after prices had fallen 12.85 cents (15%) from their contract highs, which left it vulnerable to short covering. In the monthly supply/demand (WASDE) report, USDA left 2026/27 production unchanged versus expectations for an increase, and it lowered ending stocks for 2025/26, which resulted in a slightly tighter outlook for 2026/27. USDA rarely changes its outlook between the May and June reports, so the  result may not have been much of a surprise. Now the focus switches to the June 30 Planted Acreage report, which could show  a higher number than the 9.64 million acres from the March 31 Prospective Plantings report.

COCOA

September Cocoa was near unchanged early Friday and managed to hold just above the 100-day moving average as it has all week. The US Climate Prediction Center said on Thursday that El Nino conditions are present and expected to strengthen into the Northern Hemisphere winter of 2026/27. This has the potential to bring drier than normal conditions to key production areas in west Africa, but the effects may not be felt until late in the third quarter at the earliest. In the meantime the region appears to be getting enough moisture to support the mid-crop. World Weather Inc. expects showers and thunderstorms to continue across west African growing areas through next week. El Nino could also reduce moisture in Indonesia and bring too much rain to Ecuador, two other important growing areas. Cumulative arrivals in Ivory Coast ports are the highest they have been for this point in the season in three years.

COFFEE

After spending four days flirting with 18-month lows, September Coffee rallied on Thursday and extended those gains into early Friday. Cecafe reported on Thursday that Brazil’s green coffee exports totaled 2.73 million bags in May, up 4.2% from a year earlier and the first monthly increase since November 2024. However, arabica exports were down 11.9% from a year ago at 2.13 million bags, which may have made the bears reluctant to keep pushing the market lower. Robusta exports totaled 601,756 bags, almost three times a year ago. The main coffee areas in Brazil are seeing active rainfall that is expected to continue into Monday or Tuesday. This could spark some flowering as well as delay the harvest and hinder drying of beans.

SUGAR

October Sugar fell below Thursday’s low overnight to its lowest level since April 23. Lower oil prices this morning on an announcement by President Trump that a peace deal with Iran could be signed as soon as this weekend may have added to the pressure on sugar. The sugar market has moved steadily lower over the past two weeks, as the trade apparently doesn’t view El Nino as a big enough threat to global supply. The expected shift to more ethanol production this year is expected to lower Brazil’s output, but reports this week that ethanol prices have fallen near breakeven levels undercuts that expectation. We expect UNICA to release its update on Brazil Center South sugar production for the first half of May next week.

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