Market Sees a Strong US Cotton Crop

COTTON

December Cotton extended its selloff overnight after falling to its lowest level since July 2022 yesterday. US crop conditions jumped sharply this week to 53% good/excellent, which was the strongest for this point in the season since 2021/22. This was led by a notable increase in Texas, which was also the best since 2021. Weather has been good for crop development, with enough rain and a mix of sometimes hot and sometimes cool weather. Dry/drought conditions in the southeast and Texas have been alleviated by the recent rains. The 8-14 day forecast calls for a return of warmer than normal conditions across most the US, but the extreme heat will be reserved to the northern part of the nation. There is a chance of drier than normal weather returning to in the Texas Panhandle, but much of west Texas is expected to be near-normal. Conditions point to a strong harvest.

COCOA

September Cocoa was higher overnight, as it continued its consolidation of the past two weeks. Weather in west Africa has been generally favorable to crop development with a mixture of rain and sun. BMI, a unit of Fitch Solutions, said the global cocoa grind fell 4.2% in the second quarter versus the first, which was the smallest decrease in the past five years. It also said the slowdown due to high prices could be more limited than previously expected. Nestle is expected to see sales volumes drop 0.5% in the first half of the year. Chocolate makers’ production costs are expected to go up in the fourth quarter because that is when the high prices from earlier this year will likely be felt the hardest, and these increases would likely be passed along to the consumer. Confectioners tend to buy cocoa 9-12 months in advance of being used. Earlier this week, Swiss chocolate maker Lindt reported a 7% jump in its half-year organic sales, as price increases made up for flat volume. The company said they would like to raise prices even more.

COFFEE

September Coffee was lower overnight, extending yesterday’s retracement of Monday’s strong rally. The market has been in a general downtrend since putting in a contract high on July 11. It is possible the seemingly ever-tight supply situation for robusta coffee has started to ease with the Indonesian harvest. Indonesia may see some rain return next week after a period of drier than normal weather. Forecasts for Brazil’s 2024/25 production have been revised down recently due to the extended period of dry conditions this year. Some areas received rain this week, but the key arabica-growing state of Minas Gerais remains dry. There is currently no threat of a frost. This could ultimately support higher prices. ICE arabica stocks fell 7,345 bags yesterday to 813,378.

SUGAR

October Sugar was higher overnight after falling to its lowest level since May 31 yesterday.  Prices have been in as steady downtrend since July 2, and better growing conditions in Thailand, India, and the EU have offset concerns about Brazil’s crop. There were anecdotal reports yesterday that commercial buying emerged on the declines this week and that there was some interest from China as well. It is widely expected that Brazil will see a drop off in production due to low sugar content brought about by the lack of rain. Russia’s third sugar beet test this season showed the average root weight of 250 grams, compared to 269 in July last year. However, the sugar content was 14.3% versus 11.7% a year ago.

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