Oversold but Can US Cotton Find Buyers?

COTTON

December Cotton rallied overnight but fell back inside yesterday’s range down action as the session progressed. The market appeared to put in a spike low yesterday after falling to new contract lows, which may have been the result of profit taking on the part of the shorts. The lack of USDA data due to the government shutdown leaves the market with little to trade off besides the slow pace of US exports and generally good conditions of the US crop that were reflected in the most recent data from two weeks ago. Recent development on the US/China trade front do not offer much reassurance, not the China has been a big buyer of US cotton recently.

COFFEE

December Cocoa extended last yesterday’s rally overnight and reached its highest level since September 16, the day it put in its contract high. ICE stocks continue to dwindle, and there are increasing concerns about the weather in Brazil. ICE certified stocks fell another 1,280 bags yesterday to 496,808, which is their lowest since March 2024. World Weather Inc. says rain coverage increased in Brazil coffee areas early this week, but more is needed. The next rain event is expect over the weekend before another period of drying occurs next week. The slow advancement of rain has traders concerned about the upcoming crop, which should be in its flowering/pollination stage.

COCOA

December Cocoa was slightly lower overnight but held but above Monday’s low. Good weather in West Africa and expectations for strong arrivals for have pushed nearby prices to their lowest level since February. Third-quarter grind data is expected to be released tomorrow, and traders are on the lookout for a repeat of the dismal second-quarter numbers. A Bloomberg survey of 11 analysts has expectations for the European grind to be at its lowest level for the third quarter in at least a decade. (The lowest of the last 10 years is 333,002 metric tons from 2015.) Asia expected to reach an eight year low. (The lowest in eight years is 189,407 from 2017). The North American grind is expected to be the weakest in at least two years. (The lowest was 97,881 from 2023).

SUGAR

Mach Sugar bounced off new contract lows yesterday and closed higher on the day, but it back in the vicinity of the low this morning. The trade may be cautious about pressing too much lower ahead of the bi-monthly UNICA report on Brazilian center-south sugar production that is due out this week. Valor International Sugar reported that sugarcane mills in Brazil’s center-south region have started prioritizing ethanol production and reducing sugar production, which they say is expected to limit sugar supply for the 2025/26 harvest to ensure ethanol supply. Estimates from market sources interviewed by Valor last week indicate that center-south production in the region is expected to fall anywhere from 800,000 to 2 million tons below the latest estimates. They added that the shift in the production mix toward ethanol had already been occurring in recent months but gained momentum in October.

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