Price Cut Fears Drive Cocoa Selloff

COCOA

May Cocoa was lower again early Wednesday as heavy selling retuned on expectations that Ivory Coast will follow Ghana in cutting its official price. Two government sources told Reuters that Ivory Coast was considering cutting the guaranteed farm gate price paid to its cocoa farmers to align with Ghana’s cut last week. Ghana cut its farm gate price by 28.6% for the balance of the 2025/26 main crop. The Ivory Coast–Ghana Cocoa Initiative (ICCIG) said the two African countries had been coordinating closely since the onset of the crisis brought on by the collapse in world prices on the lack of buyers interested in paying the official farmgate price. The two sources said an inter-ministerial committee has met over the issue and a decision could come soon. This may lead to a culmination of the selloff if it finally brings forth interested buyers. There are a lot of internal details to be worked out, namely whether the farmers will be compensated at the original price for the beans they have already brought to market.

COTTON

May Cotton was higher early Wednesday after falling to its lowest level in a week on Tuesday. The market bounced off contract lows last week but found stopped at the 0.382 retracement of the selloff from a January high to last week’s lows. Perhaps the trade is reluctant to push too far ahead of the USDA annual outlook forum this Thursday and Friday, which h will give an early idea of what USDA expects US cotton plantings to be this year.

SUGAR

May Sugar closed near unchanged on Tuesday after a sharply higher open, but it was in positive territory early Wednesday.  Farmers and trade officials told Reuters today that India is likely to produce less sugar than initially estimated, as excessive rainfall across major producing states is resulting in lower cane yields. Internal estimates from five trade houses (which declined to be named in line with company policies) estimated India’s production at 28.5-29 million metric tons for 2025/26, down from the Indian Sugar & Bio-Energy Manufacturers Association (ISMA) forecast of 30.95 million from earlier this month. Excessive rainfall reportedly damaged root development and led to early crop maturity. Traders also suggested India may struggle to ship even half of its allocated export quota, which increased by 500,000 tons to 2.0 million last week. UNICA will release its update on Brazil Center-South sugar production for the second half of January today.

COFFEE

May Coffee was near unchanged early Wednesday after falling to its lowest level since August 8 on Tuesday. The market is inside a month-long trading range from July 261.80 and 288.65. Pressure may be coming from heavy selling in the cocoa market as well as and anticipated strong crop from Brazil. ICE certified arabica stocks increased by 648 bags on Tuesday to 435,494. Stocks are up 9,173 bags over the past five session, but they have not been consistently increasing. However, the amount pending review increased by 12,340 bags on Tuesday to 143,758, the highest since May 16. World Weather Inc. expects Brazil coffee region precipitation to become more widespread Thursday through the weekend and continue into next week. On the whole, the weather there has been supportive for crop development over the past two months.

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