Coffee Higher, but Supply Risks Remain

COFFEE

December Coffee was higher for the second straight session early Monday, the market having found its legs after a three week selloff. The selloff came after strong exports out of Brazil finally started to ease tight supply worries and allowed exchange stocks to recover from 26-year lows. ICE certified arabica stocks were up 10,528 bags on Friday to 258,415, their highest since August 3. Stocks increased by 40,483 bags last week. Ample rainfall earlier this month in Brazil has also gotten the 2027/28 crop off to a good start. World Weather Inc. say greater rain may be necessary to ensure the best crop development and production potential. Indonesia is facing a major drought that is expected to significantly damage their robusta production. Some forecast models show a chance of are showers and thunderstorms coming up from the south, but World Weather has low confidence for this happening.

COC.OA

December Cocoa was higher early Monday but inside Friday’s range lower. The market is seeing bounce off a short term oversold condition and perhaps from concern over the lack of rainfall over the weekend in parts of West Africa. World Weather Inc. said rainfall was too light in central and southern Ivory Coast and southwestern Ghana over the weekend to counter evaporation. Northern areas of those countries, as well as Cameroon, saw heavier amounts. They expect a routine occurrence of showers and thunderstorms Ivory Coast to Cameroon and Nigeria during the next ten days. All areas should get rain at one time or another but southern Ivory Coast and southwestern Ghana still warrant a close watch. Ivory Coast has established a new marketing system this year to meet EU reporting requirements for anti-deforestation regulations. As a result, they started their marketing year on September 1 rather than their usual date of October 1. As of September 13 some 26,000 metric tons had arrived, which is about half of the arrivals for the first two weeks in October last year, but that is understandable.

SUGAR

March Sugar was higher early Monday after starting off the session at its lowest level since August 26. The large net long position held by the funds has sparked a modest decline from the September 10 contract highs, but so far the market has avoided a steep selloff, as concerns about crops in key producers India, Brazil, Europe and Thailand persist. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 10,763 contracts of sugar for the week ending September 15, reducing their net long to 236,288. This is a small reduction in the size of the net long considering that the net long is in the vicinity of the all-time high of 286,000 contracts from 2016, and it leaves the market vulnerable to heavy selling if support levels are taken out. Lower oil prices today undermine support for sugar as this reduces the incentive to produce ethanol from cane.

COTTON

December Cotton was higher early Monday following a recent selloff that took the market to its lowest level since July 31 on Friday. A slight improvement in US crop conditions, trader concerns that the funds had built too big of a net long position, sluggish export sales, perceived harvest pressure, and a turn higher in the US dollar contributed to the selling. Despite some improvement in two out of the last three weeks, the crop conditions are not good, especially in Texas. Last week’s crop progress report showed 36% of the US crop was rated good/excellent versus 52% the previous year and a five-year average of 44%. Texas was rated 18% G/E versus 47% the previous year and a five year average of 32%. World Weather Inc. says west Texas will have more frequent opportunities for rain in the next two weeks, but that may cause some fiber quality issues. The Delta and Texas Blacklands have been too hot and mostly dry recently, stressing some crops. Cooling is likely this week, and there may eventually be a few showers. There may be some hope that this week’s meeting between President Trump and Chinese President Xi will present some deal for Chinese purchases of US agricultural products. However soybeans usually capture the spotlight and cotton is not usually mentioned.

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