Coffee Rally Extends on Tight Supply

COFFEE

July Coffee has reach its highest level since March 26 on Thursday and extended the rally slightly early Friday. Some traders are citing dwindling ICE exchange stocks as an indication of tight supply. ICE certified stocks did increase by 2,506 bags on Thursday to 518,043 after falling to their lowest level since March 2 on Wednesday. Stocks pending review has fallen to 15,641 bags, the lowest since January 23. Keurig Dr Pepper beat expectations for first-quarter sales which saw a 8% decline in coffee sales volumes. Brazil’s arabica harvest begins next month and it is expected to be the highest in at least three years, if not six. World Weather Inc says net drying is expected in most Brazilian coffee areas through the weekend. A frontal system expected in southern Brazil next week that will bring some showers into coffee areas of northern Parana and southwestern Sao Paulo. There is some potential that rain will eventually reach into northeastern Sao Paulo and a few far southern Sul de Minas locations. Other coffee areas to the north are unlikely to get much precipitation and dryness will continue.

COCOA

July Cocoa was slightly lower early Friday after reaching its highest level since April 17 earlier in the session. The market broke out above a two month consolidation pattern last week. It has since stalled but it has also managed to hold above lows from April 17 and April 7. The market also survived some bearish 1^st quarter grind data from Europe and North Americal last week. Asia’s grind was higher, but not enough to offset the losses in those other regions. The Ivory Coast’s exporters’ association GEPEX on Thursday said the nation’s cocoa grind totaled 54,254 metric tons in March, up 1.4% from the previous year. Cumulative grind since the marketing year began in October has reached 334,711 tons, down 4.8% from the same period in 2024/25. Ivory Coast has total grinding capacity of about 750,000 tons, and it vies with the Netherlands being the largest grinder in the world. Ghana’s mid-crop harvest may face some difficulties as farmers still waiting to be paid for their main crop need funds to hire workers for the mid-crop.

COTTON

July Cotton was lower early Friday following a modest recovery on Thursday. Several factors have been blamed for the selloff, including increased chances of rain, disappointing export sales, a stronger dollar this week and some a pressure on a stalling stock market, but the biggest factor was likely that the market had seen a 26% gain in the span of 2 ½ months, which left it technically oversold and vulnerable to a correction. World Weather Inc says west Texas, south Texas and the Coastal Bend rainfall will be quite limited over the next 10 days to two weeks. At least the Delta will see several rain that will support topsoil moisture and improve crop and field conditions. The US Drought Monitor showed that an area representing 98% of US cotton production was experiencing drought as of April 21. The USDA attaché in China has forecast that nation’s 2026/27 cotton production at 7.2 million metric tons, down 4.5% from 2025/26. Domestic consumption is forecast at 8.4 million tons on anticipated domestic economic growth. Cotton imports for 2026/27 are projected at 1.5 million tons, up slightly from 1.4 million in 2025/26, but the 10% tariffs imposed on US cotton imports are expected to continue to suppress US exports to China.

SUGAR

July Sugar was higher overnight, extending this week’s rally off the April 17 low. Crude oil prices reaching their highest level since April 7 on Thursday lend support to sugar on ideas it will boost ethanol production and from cane, which would cut into sugar output. Gasoline prices reaching their highest levels since 2022 adds to the incentive. Also supportive is the expected arrival of El Nino as early as June, which could bring dry conditions to India and Thailand land lower their production prospects for the coming year. The new harvest season is underway this month in Brazil. Dry weather there is ideal for harvest and crushing. We expect the first Unica update on this year’s crop (for April 1-15) to be released toward the end of the month. World production forecasts for 2025/26 and 2026/27 have been slipping, but a large global surplus may still expected for 2025/26, which may keep a lid on rallies.

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