March Sugar Rebounds But Surplus Looms

SUGAR

March Sugar rallied off new contract lows yesterday and was slightly higher overnight. The market had seen a steady drift lower off expectations for strong crops out of India and Thailand and indications that the Brazilian production was continuing to improve after a slow start, and perhaps the market had gotten oversold that theme. The trend is still lower, and yesterday’s rally corrected some of the oversold condition. A private firm has projected a 2.8 million-ton global surplus for the 2025/26 marketing year (beginning October 1) after a 4.7 million tons surplus this year. They put India’s production at 32.3 million tons, up 24% from last year and Thailand’s at 11.4 million, up 14.2%. They also put Brazil 2026/27 Center-South production (beginning April 10) at 42.1 million tons, up 5.7%  from this year.

COCOA

December Cocoa found support overnight after falling to its lowest level since putting in a low in mid-July yesterday. Rainy conditions have returned to West Africa, which is viewed as beneficial to the crop,  but the late arrival of the rains has raised some concerns that the main crop harvest will be delayed. Also, there are reports that rains in Ghana have been too light to benefit the crop very much. World Weather Inc expects routinely occurring rainfall to continue through the next week across the region with all production areas eventually impacted. The overnight maps showed moderate rainfall across much of Ivory Coast over the last 24 hours, with light rainfall in the southern half of Ghana. Reuters reported that origin hedge-selling ahead of the start of the 2025/26 season has put downward pressure on prices recently, and perhaps some of that selling eased after prices had fallen 1989 (23%) since August 11. The European Commission is considering delaying the implementation its deforestation law for another year. The law requires importers to provide evidence that the land used to produce a commodity was not from deforested areas and was originally was supposed to go into effect in late 2024. Sophisticated tracking systems are required to comply with the rules, and importers must have collected precise data identifying the plots of land where the goods were grown. A delay would reduce concerns that there would be a lot of cocoa looking for buyers at the beginning of next year.

COFFEE

December Coffee is higher this morning after falling to its lowest level since August 20. Like cocoa, coffee may have gotten a bit oversold on some bearish supply themes. At yesterday’s low, the market had fallen 74.75 cents (18%) in six sessions. President Trump said yesterday that he would meet Brazil’s President, raising hopes for progress on a deal to end the 50% tariffs that have raised the cost of Brazilian coffee in the US and sent buyers scrambling to other sources, including ICE exchange stocks. Recent rains in Brazil have improved the outlook for the 2026/27 crop, which should be entering the flowering stage. World Weather Inc said yesterday that rain had expanded and overspread most of the coffee production areas south of northern Minas Gerais and would linger into today. Then next event will hold off until the middle part of next week. The moisture will help induce some flowering and pollination, but a higher volume of rain will be needed for the best conditions. Vietnam may be impacted by two tropical cyclones during the next week. Typhoon Ragasa is expected to move over portions of northern Vietnam Thursday and bring heavy rain and possibly some flooding to the region, with gusty winds and perhaps some damage to some coffee trees. The next is a tropical depression that has lower confidence but could be near Vietnam early next week

COTTON

December Cotton is slightly lower this morning after seeing a sharp bounce yesterday. Cash cotton traders have reportedly seen good buying around the 66-cent level. The December futures have been in a choppy, sideways pattern since April and have put in lows at 66.27, 65.88, 68.80 and 66.03. However, the highs have been consistently lower, showing a limit to buyer interest. Crude oil has also seen choppy sideways action, and its modest recovery this week improves the economics of using cotton as opposed to man-made fibers. US crop conditions deteriorated this past week, but they were still ahead of average, especially in Texas.  World Weather Service says warm temperatures and limited rainfall in West Texas will help expedite the crop’s development of cotton. Some growth retardant has been applied to a part of the crop to limit new development while supporting the ongoing development of established bolls. Some yields outside of the southwestern dryland fields should be good. The Delta is dry, resulting in some crop stress. Xinjiang, China crops are rated favorably. Some defoliation and harvesting are under way. US export sales are the slowest they have been in at least 11 years, and as of last week cumulative sales had reached only 35% of the USDA forecast for the marketing year versus a five-year average of 52% for this point in the season.

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