Tight Supply Pushes Coffee Higher

COFFEE

May Coffee made another new high for the move early Tuesday, reaching its highest level since February 3. Despite a strong outlook for the 2026/27 Brazilian crop, there have been reports of farmers holding back sales on worries over further shipping disruptions and rising freight, fertilizer and energy costs linked to the Iran war. The Brazilian real has been trading near 22-month highs over the past several weeks, and the strong currency reduces the incentive for Brazilian producers to sell for export. A sharp decline in ICE certified stocks has attracted attention as well. Stocks fell another 8,878 bags on Monday to 532,861, their lowest since March 5. Stocks have declined 53,000 bags in three sessions.

SUGAR

May Sugar was higher early Tuesday following a mild decline on Monday and was close to taking out Monday’s 5-month high. The steep selloff in crude oil prices on Monday did not appear to have much impact on sugar, as the market held of its gains. Higher crude and gasoline prices are viewed as supportive to sugar on ideas they will encourage Brazil to crush more cane for ethanol at the expense of sugar, but there are other factors involved, including recent revisions lower in global supply and Indian production. That being said, Czarnikow said on Monday that several countries, especially in Asia taking steps to increase the use of ethanol in their car fleets to cut demand for gasoline, and a one-day selloff in crude is not enough to change that trend. They mentioned ethanol producers in India looking to raise the gasoline blend above the current 20%, Philippines looking to import more ethanol to meet its E10 blend obligation, Vietnam planning a 10% ethanol blend in June. They also said that if Brazil’s oil company Petrobras adjusts the local price for gasoline to import parity, ethanol prices could rise to the equivalent of a sugar price of 18 cents. India appears to have stepped up their sales now that global prices are higher, and the possibility of further sales could limit gains.

COCOA

May  Cocoa has been consolidating in a narrow range for two weeks after putting in what appear to be a tentative low on March 2. The West African crop appears to be in good shape, and demand has been slow to recover after being severely damaged by record high prices, but with prices back to “normal” levels, the market is looking for a low. Demand will be slow to recover as candy manufacturers will want to keep prices elevated until they work through their high-priced cocoa inventories. Ivory Coast farmers interviewed by Reuters said Monday that insufficient rain fell in most of Ivory Coast’s cocoa-growing regions last week and that more precipitation would be needed next month if the outlook for the March-to-August mid-crop is to improve. ‌ Farmers said they expected strong harvests starting in May because many average-sized pods were developing on trees and some were already ripening. Cocoa trees were not showing signs of weakness as their foliage remained green despite the heat. World Weather Inc. expects slowly increasing shower and thunderstorm activity for the coming week to ten days that will maintain a favorable outlook for most of the region’s cocoa crop.

COTTON

May Cotton extended its recent selloff early Tuesday, as the market continued its correction from a sudden rally last week after the market breeched a technical signal that sparked a wave of short covering. Dry conditions in Texas offer fundamental support as US plantings are getting underway. Crude oil, equities, and the dollar were tossed around on Monday, adding to the volatility. Lower crude oil prices are viewed as negative to cotton in that they reduced the cost of man-made fibers, but higher equity markets are good for demand. World Weather Inc. says south Texas and northeastern Mexico need rain to support planting this month and in April. A few showers are possible in early April, but a general soaking seems unlikely prior to that time. West Texas also needs rain and only light amounts are expected – most of which will occur in the first days of April.

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