COCOA
Cocoa traded to new all-time highs yesterday and was inside yesterday’s wide range overnight. The rally is being driven by fears that the dry conditions in west Africa are increasing the chances for a fourth straight global supply deficit in 2024/25. The dry season has arrived, and one worry is on how strong the drying Harmattan wind will be this year. Reuters reported that physical market deals have nearly ground to a halt due to payment delays, as traders are strapped for cash given soaring trading costs in the futures. West Africa saw no rainfall over the last 24 hours, and World Weather Service expects little change over the next week. Showers may pop up occasionally in coastal areas from Ivory Coast through Nigeria and Cameroon, but most interior crop areas will remain dry and warm. ICE exchange stocks fell 4,548 metric tons yesterday to 1.401 million, their lowest since December 2003.
SUGAR
March Sugar extended this week’s selloff overnight to trade to its lowest level since September 16. Record lows in Brazilian real against the dollar encourages mills to sell sugar, because this boosts their returns in terms of their local currency. That adds to the pressure that the market had already felt from stronger than expected Brazilian production for the second half of November. India’s food secretary said today that the government may allow some sugar exports, provided there is any surplus left after ethanol blending. The government suspended export licenses last year after a weak monsoon lowered cane yields. A stronger monsoon this year has improved crop prospects, but the government also wants to support its domestic ethanol industry, so there has been some question whether sugar exports would be allowed.
COFFEE
March Coffee closed the gap from last Tuesday overnight, leaving last Monday’s record high at 348.45 as the next target. The market has rallied off concerns about Brazil’s 2025 crop in the wake of a long, severe drought earlier this year. Reached new highs last week after one trade house sharply lowered is forecast, but others remain more guarded in their assessments. Recent rainfall has improve the crop’s prospects, but the question remains whether it has come in time. Coffee trading in Vietnam is thin ahead of the Christmas holiday.
In their semi-annual world coffee update released yesterday, USDA lowered global arabica production for 2024/25 to 97.8 million bags from 99.9 million in its June update. This was primarily due to a 2.8 million-bag decline in Brazilian production to 45.4 million. Robusta production was increased by 630,000 bags to 77.0 million. Vietnam’s production estimate was increased by 1.2 million and Brazil’s was lowered by 700,000. Total coffee production for 2024/25 is now estimated at 174.9 million bags, down from 176.2 million estimated in June but up from 168.0 million in 2023/24. World ending stocks for 2024/25 are now estimated at 20.9 million bags versus 25.8 million in June and 22.3 million for 2023/24.
COTTON
March Cotton took out its contract low overnight, as a gloomy outlook for demand left little for the bulls to cling to. The FOMC meeting brought an as-expected 25 basis point cut, but the post-meeting comments indicated there would be only two cuts in 2025. Equity markets sold off sharply and the dollar rallied, none of which is good for cotton demand or export prospects. The Brazilian real falling to a record low against the dollar did not help either, as the week currency increases the incentive for Brazilian producers to sell. Last week’s report showed net sales of 156,333 bales for the week ending December 5, which was the lowest since November 7 and the second lowest since October 3. Cumulative sales had 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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