Mid-Crop Outlook Boosts Cocoa

COCOA

May Cocoa appears ready to test last week’s three-week high. Ivory Coast port arrivals were estimate at 20,000 metric tons for the week ending March 15, up from 15,000 the previous week and 14,000 tons from a year ago. Cumulative arrivals since the marketing year began in October have reached 1.370 million tons, down from 1.414 million at this point last year and a five-year average of 1.528 million. The increase in the arrivals pace may be an indication that sales are proceeding now that farmgate prices have been reduced. Ivory Coast farmers told Reuters that rains were below average last week in most of country’s cocoa-growing regions but that soil moisture content was enough to boost the March-to-August mid-crop. Weather conditions have been good so far, resulting in the healthy growth of many flowers, small and average pods, farmers said. They also said if it rains every week until the end of the month, the mid-crop would be longer and larger than last year.

SUGAR

May Sugar was higher early Tuesday, marking the fourth straight session of back and forth action since the market reached its highest level since January 14 last week.  Stubbornly high crude oil prices with no immediate relief seen from the blockage of the Strait of Hormuz provide underlying support for sugar on ideas this will support more ethanol production from cane in Brazil. A group of industry lobbies in Brazil expects the nation’s ethanol production to rise by some 4 billion liters in the 2026/27 season, which would be an new a record.

COTTON

May Cotton was firm early Tuesday and confined to the upper part of Monday’s breakout range. The market broke above the neckline of what appears to be a head and shoulders bottom technical formation on Friday, which sparked a short covering rally to levels not seen since last October. The fund position has been near a record net short level for some time, which left the market vulnerable to aggressive buying. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 6,182 contracts of cotton futures for the week ending March 10, reducing their net short to 66,754, but that is still historically large. Higher oil prices overnight support cotton on ideas that this raises the cost of polyester, a cotton substitute. West and South Texas, northern Mexico, the southwestern U.S. desert region, southern California and the southern Rocky Mountain region along with the interior Pacific Northwest will be dry for the next ten to twelve days. These areas need rain ahead of planting. Sharply higher fertilizer prices due to also to restricted movement of exports out of the Persian Gulf is also supportive.

COFFEE

May Coffee was higher early Tuesday and back in the vicinity of last week’s high. The Brazilian real recovered on Monday after a selloff last week, which may have discouraged Brazilian sellers. Brazil is expected to see frequent showers and thunderstorms through the coming week and into early next week, with sufficient rain to maintain a very good environment for coffee. There were reports that Vietnamese growers have begun releasing more beans on fears that prices could fall further due to the Middle East conflict and from expectations that Indonesian bean would be hitting the market soon. On the other hand, broker told Reuters they were not panicking. ICE certified stocks increased by 9,826 bags on Monday to 581,830, their highest since September 24.

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