WASDE Report Today

COTTON

May Cotton was higher overnight but did not take out the February 5 high. The rally yesterday was described as short covering ahead of today’s monthly USDA supply/demand report (WASDE), but it may have also been a reaction to the Commitments of Traders report on Friday afternoon, which showed managed money traders were holding a record net short position. According to a Bloomberg survey of analysts, the trade is not expecting many changes in the report today. The average expectation for US 2024/25 production was 14.41 million bales (range 14.3-14.5), which would be unchanged from the January report. Exports are also expected to be unchanged at 11.00 million bales (range 10.8-11.2), and ending stocks are expected fall slightly to 4.79 million bales (range 4.5-5.0) versus 4.80 million in January. (The USDA lowered its export forecast by 300,000 bales in the January report. Weekly export sales have reached 86% of the USDA forecast versus a five-year average of 89% for this point in the marketing year, which may not be a big enough deficit to warrant another revision lower in exports.) World production is expected to come in at 119.53 million bales versus 119.45 million in January, with consumption at 115.80 million versus 115.89 million in January and ending stocks at 77.89 versus 77.91 million in January.

SUGAR

May Sugar was higher overnight but still inside Friday’s range down action. The managing director of Dubai’s Al Khaleej Sugar said today that it is operating at 70% capacity as sugar refineries in the Middle East struggle with overcapacity, the company’s managing director. He added that there is a 60-70% overcapacity in the Middle East, with some refineries operating at 30-40% capacity. He also cited India’s decision to allow sugar exports as having a negative effect on prices. This follows a report yesterday that at least 37 sugar mills in India’s leading cane-producing states halted operations last week, nearly two months earlier than usual, which was blamed on lower cane supplies caused by adverse weather. Last month, the Indian Sugar and Bio Energy Manufacturers Association forecasted 2024/25 sugar production at 27.27 million metric tons (down 14.7% from a year ago), and the fast pace of mill closures would point to even lower output. Can both be true? Nearby sugar prices fell to their lowest level since August last month, and they have rallied 15% off those levels. Brazilian production has fallen sharply over the past month or so, but that is typical for this time of year. Last week, Green Pool said they expect the global sugar balance to show a modest surplus of 2.7 million metric tons in 2025/26, up from a deficit of 3.7 million in 2024/25 due to higher production from Brazil, India, and Thailand. Unica is expected to release its biweekly update on Brazilian Center-South sugar production this week. The emerging dry trend in Brazil may be providing some support.

COCOA

May Cocoa is higher this morning and has managed to hold Friday’s six-week low this week, but has yest to embark on a recovery. Ivory Coast farmers told Reuters yesterday that a lack of rain in most of the nation’s cocoa-growing regions could delay the start of the mid-crop. They warned that if plantations don’t receive two abundant rains before the end of February, the mid-crop would start slowly with a possible shortage of beans in April. It looks like those farmers may get their wish. World Weather Service reports that rain did fall in portions of Ghana and southern Ivory Coast over the weekend, reaching 84 millimeters at one location in southeastern Ghana and up to 62 millimeters in a part of southern Ivory Coast. Most other official amounts reported off the coast varied by as much as 33 millimeters. They added that most of the computer forecast models have been hinting of additional rainfall periodically during the next ten days, especially in Ivory Coast and southwestern Ghana. Most of significant rain is expected in the second half of this week through early next week, with western Ivory Coast getting some moderate to locally heavy rainfall. ICE warehouse stocks increased 1,775 bags on yesterday to 1.398 million.

COFFEE

May Coffee is lower this morning but inside yesterday’s range up pattern. Overnight, the market posted a new all-time high for the 12^th straight session. The trade has been growing increasingly concerned about a turn towards hotter and drier weather in Brazil. Until now, the main focus has been on the likely damage to the crop from last year’s drought, with the idea that active rainy season of the past few months may have mitigated some of the damage. World Weather Service noted that precipitation diminished across much of Brazil over the weekend and areas of net drying have begun to show up. They added that below normal precipitation and erratic precipitation pattern will become the topic of the next couple of weeks but that coffee trees have sufficient subsoil moisture to carry on normal development for a while. However the drier bias will need to break down later this to protect cherry quality. May London coffee has traded to its highest level since putting in an all-time high on January 31. ICE certified arabica stocks increased by 10,253 bags yesterday to 872,991. Friday’s COT report showed the fund net long was close to a record high, which leaves the market vulnerable to heavy selling if support levels are taken out.

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