Excess Rain Delays Coffee Drying

COFFEE

Unseasonable rains in Brazil are slowing the harvest, interrupting drying, and raising concerns about the potential for bacterial and fungal diseases. Reuters reported that most coffee-producing areas in southeast Brazil, including the main producing state of Minas Gerais, had three consecutive days of rain from June 11 to June 13 during what is typically the dry season. One farmer told Reuters that at least 10% of his berries must have dropped from trees. The excess rainfall being blamed on El Nino, and meteorological data from LSEG shows precipitation may exceed historical averages between during the second half of June. July Coffee traded to its highest level since May 29 early Tuesday, continuing its week-long recovery rally off 18-month lows. Up until recently the trade was expected a bumper crop, and the recent rainfall and the threat of ongoing rains presents the first major hiccup from those predictions in quite some time.

SUGAR

October Sugar extended its recent selloff overnight to its lowest level since April 21. The peace deal between the US and Iran reverses one of the key supportive factors for sugar – the idea that high oil prices will encourage more use of cane for ethanol instead of sugar production. There is the potential that the reopening of the strait will support demand for raw sugar from refineries in the Persian Gulf that have been locked in since the strait was closed but that does not ease concerns about excess supply. Analysts have been bouncing back and forth between surplus and deficit with their estimates of the global supply demand balance for 2026/27, and the latest developments appear to be pushing more towards a surplus. However, heavy rains are forecast for the second half of June in Brazil’s central-south region, which could slow cane harvesting and crushing. The excess rainfall is linked to the El Nino, which is gaining strength and providing more energy to weather systems, according to Rural Clima’s agrometeorologist.

COTTON

December Cotton was sharply higher early Tuesday, as the trade seems to be encouraged by demand prospects while remaining concerned about the lack of moisture in west Texas. World Weather Inc. expects an erratic distribution of rain is in west Texas over the next week with very few areas getting enough rain to seriously counter evaporation. The market appears to have discounted the crop rating from the Crop Progress report late Monday, which showed 50% of the US cotton crop was rated good/excellent as of June 14, down from 53% the previous week but up from 48% a year ago and the five year average.

COCOA

September Cocoa extended its recent rally early Tuesday and traded to its highest level since May 28. Ivory Coast grind activity and port arrivals are strong relative to recent years, which though indicative of improve production may be offering a sigh of relief for demand as well. Recent rainfall has been on the light side in west Africa considering this is their rainy season, but growers and meteorologists report soil moisture is adequate. There were even some growers in southern Ivory Coast expressing concern that too much moisture and overcast skies were inhibiting the drying process.

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