Oct Sugar Held Firm Overnight

COCOA

December Cocoa was higher overnight and traded back near Wednesday’s two-week high. Tight near term supplies and a dry spell in west Africa have supported the market this week. Traders are noticing a decline in ICE exchange stocks, which fell to 2.85 million bags on August 7 from 3.14 million a month ago. The September-December Cocoa spread reached a new contract high of 1568 on Wednesday, which also attests to tight supplies. Coffee and cocoa areas from eastern Ivory Coast through parts of Ghana to Benin and southwestern Nigeria have reported below to well below normal rainfall in the past 30 days with the driest conditions occurring in the most recent ten days to two weeks, and this has raised concerns about production after mostly positive reports from growers this summer. However, World Weather Service expects rains to return in late August and especially September that would bring relief. A mixture of rain and sunshine is ideal.

COFFEE

December Coffee is lower today after reaching its highest level since July 15 on Thursday. The US Climate Prediction Center gave a 66% chance of La Nina forming during September-November. This could bring cooler and drier weather to Brazil, which will not be welcome, as dry weather is already a concern. Safras and Mercado said today that Brazil’s 2024/25 harvest was 92% complete as of Tuesday. Vietnam exported 76,982 metric tons of coffee in July, up 9.7% from June. January-July exports totaled 979,353 tons, down 12.4% from a year ago. Cooler weather is moving into Brazilian coffee areas late this week and into early next week, but it it’s not expected to bring a threat of frost. Some of the highest elevated areas not far from coffee country may see temperatures low enough for a little soft frost, but the potential for damaging cold in coffee areas is very low. Some coffee areas may receive light to moderate rain, but not enough to make much improvement to dry soils. Seasonably dry conditions are expected to dominate over the next week. Dry conditions this year have reduced the quality of the current crop and raised concerns about the upcoming crops.

COTTON

December Cotton was higher overnight after pushing to another new contract low yesterday. Slow US exports, concerns about demand, and expectations for ample supply this year have sent nearby cotton prices to their lowest level in four years. They have also pushed the market into an oversold condition and the fund net short to a record level, which leaves the market vulnerable to short covering. The weekly US Drought Monitor showed approximately 13% of US cotton production was in an area experiencing drought as of August 6, up from 11% the previous week but down from 21% a year ago and 66% two years ago. There was some moisture loss last week in the northern and western portions of Texas, eastern Oklahoma, southern Arkansas, and Mississippi. Many reservoirs in the western half of Texas are experiencing below-normal levels. USDA reported statewide topsoil moisture rated by percent short to very short as follows: Tennessee 29%, Mississippi 39%, Arkansas 47%, Louisiana 22%, Oklahoma 59%, and Texas 67%. The 6-10 and 8-14 day forecasts show below normal rainfall chances in Texas and the Delta, which could cause some moisture stress.

Yesterday’s US export sales report (for the week ending August 1) showed net cotton sales of 190,835 bales for the 2023/24 marketing year, net cancellations of 949,623 for 2024/25, and net sales of 11,520 for 2025/26. August 1 marked the beginning of the 2024/25 marketing year, and there were there were 4,080,097 bales of outstanding sales that were rolled forward from 2023/24.

SUGAR

October Sugar held firm overnight after a sharp rally yesterday. The market is pushing up against trendline resistance following this week’s rally off 16-month lows. A drier trend in Thailand this week and talk that India’s government will not lift its export sugar curbs despite good rainfall paint a less bearish supply picture from Asia this week. The Brazilian real was higher again yesterday, which reduces the pressure on Brazilian mills to sell for export. Dry weather in Brazil is another concern. Traders are anticipating the release of the UNICA report on Brazilian sugar production for the second half of July, which could be out this morning. The previous report showed first-half July Center South sugar production at 2.939 million tons, down 9.7% from last year and down from 3.247 million in the second half of June. The fact that they had declined from the previous period was a surprise. A survey by S&P Global Commodity Insights had a median forecast for sugar production in the second half of July at 3.6 million tons, which would be down 2.4% from a year ago but up from the first half.

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