Sugar Gains an Ethanol Edge

SUGAR

October Sugar made another sharp rally early Friday but then fell  back to lower on the day. The market has seen a mix of bullish and bearish fundamental stores over the past 24 hours or so. EU’s Sugar Market Observatory said EU 2026/27 sugar production is expected to come in 13.4 million metric tons, -19% from 2025/26. Imports are seen at 2.35 million tons, up from 1.73 million in 2025/26.  A report from the Australian analyst firm Green Pool early Thursday forecast a smaller global sugar deficit for 2026/27 than they had previously. The current forecast calls for a deficit of 3.24 million metric tons versus a previous forecast of 3.34 million. They said higher planted area and encouraging beet test results in Russia and an assumption that India will reduce the amount of cane it diverts for fuel ethanol to a minimum helped offset declines in EU production. They raised their forecast for India’s sugar production to 30 million tons from a previous projection of 29.7 million, saying that India is under pressure to raise sugar production versus ethanol due to record cash prices this year.

Datagro said less than a third of Brazil’s flex-fuel vehicles have used ethanol made from sugarcane so far this year, even though it is cheaper than regular gasoline in much of the country. Ethanol use at 29% steady since 2024 and well below the 36.7% share it held in 2019. A representative of the firm added that higher sugar prices could push producers in Brazil’s center-south region to focus more on producing food than fuel.

COCOA

December Coffee was higher early Friday following a rally on Thursday off concerns about the upcoming crops in West Africa. Ivory Coast farmers told Bloomberg that the first harvest has already started in parts of the country’s southwest but the lack of sunny weather is threatening bean quality. Ghana farmers said limited sunshine is aiding the spread of black pod disease and that the government has yet to distribute the chemicals needed to fight it. World Weather Inc. said scattered showers and thunderstorms are expected to persist in west-central Africa through the next week but that a more generalized rain will still be needed, especially in southern production areas. This week, Ivory Coast’s Coffee and Cocoa Council (CCC) said the main cocoa crop had been delayed by 8-10 weeks due to difficult weather conditions, insufficient farm maintenance and the strength of the mid-crop, which delayed development of the main crop. CCC expects congestion at the key cocoa ports in November and December, as exporters rush to beat the EU deforestation regulations that go into effect at the end of the year.

COTTON

December Cotton was trading near unchanged early Friday, trading near the upper end of Thursday sharply higher session. The market broke out of a weeklong consolidation on Thursday to reach another new contract high, as there appears to be no letup in the hot and dry conditions in key US growing areas. World Weather Inc. says showers in Oklahoma, West Texas and the Texas Blacklands over the next few days will bring some temporary relief, but it will only be temporary. More heat and dryness are likely this weekend into next week.  The US Delta may see some relief from recent hot and dry conditions over the next few days. India and Pakistan could see some net drying over the next ten days that will raise concern over crop conditions. Soil moisture is sufficient to carry crops for a while.  Temperatures will trend hotter over time.

COFFEE

December Coffee was near unchanged early Friday after a steep selloff the previous two sessions. The market turned technically bearish this week after a failure to tale out contract highs from last September appears to usher in a round of profit taking. The market also experienced a fundamental turnaround after the Brazilian exporters association Cecafé corrected the coffee shipment data on its website. The site had been showing cumulative totals for export registrations running 22.5% behind last month, but they later corrected the data to show export licenses were up 20.5% as of August 26, thus turning the outlook suddenly bearish. Cooxupe, Brazil’s largest coffee cooperative, said this week that its farmers had harvested 87.5% of their 2026 crop as of August 21, up from 81.1% the previous week but down from 91.3% at this point last year. Near-term arabica supplies remain tight, with ICE certified arabica stocks down 606 bags on Thursday to 224,011, which is at or near the lowest they have been since 1999. The vice chairman of the Vietnam Coffee-Cocoa Association, told Reuters that the nation’s 2026/27 robusta coffee crop could see a slight increase from last year but the threat posed by this year’s El Niño should not be underestimated. World Weather Inc. says increased rain in Brazilian coffee areas from northern Parana to Cerredo Mineiro, Zona da Mata, Espirito Santo and Sul de Minas over the past two days has hinted of the coming rainy season, but most of the precipitation was too light for flowering. Periodic showers and thunderstorms next week will increase topsoil moisture for a few area, and there is potential for some pockets of flowering next week.

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