Better Cocoa Demand Prospected
December cocoa traded to new contract highs yesterday and continued with mild gains overnight on concerns that El Nino will bring a third global supply deficit in a row. The trade is also awaiting the third quarter ICCO report, which is due out today, and it is expecting to see the 2022/23 global production deficit to be revised higher from the current 128,000 tonnes. There has been little improvement in West African supply concerns over the past few weeks. Nigeria’s cocoa exports totaled 13,317 tonnes in July versus 15,490 a year ago. They are the world’s fifth-largest producer of cocoa. Development of the upcoming main crop in west Africa has been described as very poor in a report from Bloomberg, with reports of swollen-shoot disease in Ivory Coast and a shortage of fertilizer in Ghana.
Concerns that El Nino will hurt next season’s production in Brazil and Colombia are providing support to the coffee market this week. Hot weather and irregular rains can affect the blossoming of the coffee tree, which affects the quantity and quality of the upcoming crop. Brazil’s largest co-op Cooxupe said that their farmers had completed 92% of their current harvest by last Friday, which is 1% ahead of last season’s pace and suggests that the harvest could be mostly complete by the middle of September. A positive vibe for global markets has given a boost to demand expectations.
The decline in the dollar this week has improved the competitiveness of US cotton on the global market, but the main support to cotton prices recently has been concern over the US crop. Nonetheless, traders could be looking to this morning’s weekly export sales reports to see if there has been any improvement after last week’s report showed net sales of 91,693 bales for the week ending August 17, the lowest since July 27. Cumulative sales for 2023/24 had reached 5.165 million bales, down from 7.367 million a year ago and the lowest for this point in the season since 2016. Hurricane Idalia made landfall in Florida on Wednesday and moved into cotton growing regions in Georgia. It is the Carolinas today. It has brought heavy rains and strong winds to a broad swath and could cause damage to the crops. However, as of Sunday only 15% of bolls were open in Georgia and 9% and 12% in North and South Carolina, which suggest so the potential for damage to the quality of the cotton from excessive rain is limited.
October sugar recovered overnight after a weak close yesterday, as the market sees the potential for lower production in 2023/24 from El Nino as a counterbalance to the strong crop out of Brazil. London white sugar prices reached a 12 1/2 year high yesterday, which provided carryover support to the New York market. The India weather department reported that the nation received 36% less than normal rainfall for August and 10% less for June through August. The drop in rainfall has brought concerns over El Nino and its potential to reduce the cane crops in India and Thailand this coming season to the forefront. India’s government has stated that that they will not make any decision on next season’s sugar exports until state cane commissioners make 2023/24 crop estimates.
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