India Extends Tariff Exemption on Cotton Imports

COTTON

December Cotton was higher overnight on news that India had extended the 11% import duty exemption on cotton by three months to the end of December.  This is designed to support their garment industry hit by the US tariffs. Industry officials told Reuters that the cotton is likely to be sourced from Australia, Brazil, Africa and the US. The exemptions were first announced on August 19, and today’s weekly USDA export sales report will be the first one to cover the period after the exemptions were lifted. Last week’s export sales report showed net sales for the week ending August 14 at 105,373 bales, all for the 2025/26 (current) marketing year. Cumulative sales for 2025/26 had reached 3.233 million bales, down from 4.213 million at this time last year and the lowest since 2015/16. Sales had reached 29% of the USDA forecast versus a five-year average of 46% for this point in the marketing year. India was the fifth largest buyer that week at 7,292 bales that week versus 35,804 for Vietnam, 28,149 for Pakistan, 21,328 for Bangladesh, and 8,423 for Peru. India the twelfth largest buyer in terms of commitments this year at 52,728 bales versus number-one buyer Vietnam’s 625,111 bales. Vietnam is planning to switch completely to ethanol-blended gasoline from next year, opening up the possibility for the Southeast Asian country to import more ethanol and corn from the United States. World Weather Service said West Texas rainfall this weekend will help improve soil moisture that has been low for a while in the dryland production areas, although more rain will be needed to support long term crop development. However, cooler than usual weather this weekend and next week will slow plant development rates further, delaying cotton maturation and raising concern over the first frost and freezes of the season. Xinjiang, China temperatures have been chilly recently and need to warm up to get crops back on normal development track after some milder than usual weather this summer.

COCOA

December Cocoa has been in a consolidation pattern this past week after putting in a two-week low on Friday. Demand concerns have been a limiting factor, but we could see new concerns emerge about the upcoming main crop. Sources told Bloomberg this week that cold and dry weather is slowing down plant development in Ivory Coast and that a lack of sun sunshine is breeding black pod disease in Ghana and Nigeria. World Weather Service says seasonal rains will slowly return to parts of Ivory Coast and Ghana in September after shifting far to the north in recent weeks. However, they added that that there is not much sign of this happening for a while and that could threaten new crop development. Weak demand has been in the back of traders’ minds since the July release of the low grind data for the second quarter. US tariffs on cocoa exporters threaten to hurt demand even further, but there does seem to see some movement towards exemptions this week for Indonesia and Ecuador.

COFFEE

December Coffee traded to its highest level since April 29 (the day it peaked) overnight but back off from that level and was slightly lower this morning. London (robusta) futures also backed off from their highs after trading to their highest level since May 14. One supportive factor recently has been the steady decline in ICE certified stocks. They fell another 535 bags yesterday to 716,578, the lowest since May 10, 2024. However, the amount pending review increased by 14,353 to 34,389, the highest since August 12. Mexican origin coffee has led the increase in pending stocks. Brazil origin stocks still make up the largest portion of certified at 128,309 bags, but they have none pending review. US buyers are faced with a 50% tariff on Brazilian coffee, which up to know has represented about one third of US coffee consumption. J.M. Smucker, which owns Folgers and Café Bustelo, said this week that it would continue raising coffee prices to help offset rising costs from tariffs. The company has raised coffee prices twice this year to recoup some of its own higher costs. US consumption may be relatively price inelastic, but ultimately higher prices will limit demand growth. Brazil will have to sell their coffee to someone. Brazil’s 2025/26 arabica harvest is about complete. A frost in Brazil earlier this summer appears to have caused some limited damage to their 2026/27 crop. It has been dry and warm recently, and that is expected to continue for a while. Seasonal rains should return in late September.

SUGAR

October Sugar has been in a sideways pattern for two weeks, supported by lower production estimates from Brazil and limited by good growing weather this season in Asia. This week, Brazil’s national crop agency Conab cut its forecast for the nation’s 2025/26 sugar production to 44.5 million metric tons from 45.9 million previously, citing hot dry conditions last year, including the wildfires last September. Center-south production is now forecast at 40.6 million tons, down 2.8% from the April forecast of 41.8 million. Production is still expected to increase by 0.8% form 2024/25. One caveat is that crushers are prioritizing sugar production over making ethanol. The UNICA reports have supported this trend, with the latest report showing cumulative production as of August 1 was running 7.8% below a year ago. Production bounced back in the first half of July after a slow June, but the second half of July was slightly below last year. The next report, which will cover the first half of August, should be out late this week. We have received no notice of release, but they usually come out by the end of the month. There have been some occasions when they were released at the beginning of the following month. Brazilian center-south production has a tendency to peak in the second half of July. World Weather Service says southern Brazil will experience a good mix of rain and sunshine during the next two weeks, which should maintain favorable soil moisture.

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