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Brazil Coffee Harvest Picks Up


The strong pace of the Brazilian harvest is pressuring coffee prices, and the market may need to receive bullish supply/demand news to avoid further declines. The June/July pullback has resulted in a 17.5% loss in less than five weeks. Brazil’s Arabica harvest appears to be well ahead of last season’s pace, with farmers at the nation’s largest co-op, Cooxupe reporting they were 43% complete by last Friday, up from 33% a year ago. This is their quickest pace in three years. The Brazilian trade group Cecafe said that their June Arabica exports came in at 2.06 million bags, which was up from 1.984 million in May but down from 2.688 million a year ago, down 23% from last year. Early delays in the harvest were a key factor in the decline, but weather has been nearly ideal since mid-June. Total exports for the season (which ended June 30) were at 31.8 million, 10% less than 2021/22. With Brazil’s harvest back to nearly full speed, there should be an uptick in their coffee exports during the third quarter.


September cocoa gapped lower overnight after the European second-quarter grind came in lower than anticipated at 343,283 tonnes, down 5.7% from a year earlier. The trade had been expecting a flat to slightly lower number, but apparently this was worse than expected. German Grind was 93,340 tonnes, for a 2.3% decline. Their first quarter grind was up 4% from a year earlier. With the market up near seven-year highs after a 9 1/2 month uptrend, funds holding a near-record net long position, and technical indicators overbought and signaling divergence at the recent highs, it is due for a correction. Yesterday the Malaysian Cocoa Board reported their nation’s second quarter grindings at 92,087 tonnes, which was down 0.3% from last year. This is not a good sign for the Asian second quarter grindings total which will be released next week. Asia has been considered the engine for global cocoa demand growth, so the Malaysian quarterly result does not reflect well on global demand prospects.


The USDA monthly supply/demand report was bearish, with US and world ending stocks coming in higher than expected, but the market peaked yesterday well before the report was released, which indicates it had already turned bearish. The USDA report showed 2023/24 US cotton production at 16.50 million bales, unchanged from their June estimate and very close to the average trade expectation of 16.53 million. Ending stocks came in at 3.80 million bales versus 3.47 million expected and up from 3.50 million in June. Exports were lowered to 13.75 million from 14.00 million in June. US crop conditions are well ahead of last year and about average relative to the past 10 years. A hot and dry forecast for west Texas could support the market, but it probably needs to see damage show up in the weekly conditions report before it becomes too concerned. Weekly US cotton export sales have been running between 230,000 and 285,000 bales for the past three weeks, and it may take much higher number today to get the bulls excited. As of last week’s report, current and new crop cumulative sales were the lowest since 2015/16.


Sugar prices broke out of their July consolidation zone to the upside after Brazil’s sugar production for the second half June came in lower than expected, but further upside may be limited, as their overall production is still running far ahead of last year. In their supply report on Tuesday, Unica noted that Brazilian sucrose yields were 3% lower than last season, as farmers extended their harvest to immature cane plants during the extended periods of dry weather. However, production was 7.6% above last year, and sugar’s share of crushing was 49.5% versus 45.5% for the same period last year. China’s Ag Ministry kept their 2023/24 sugar production estimate unchanged at 10.0 million tonnes and their import forecast unchanged at 5.0 million, which leaves the nation on-track for a production deficit of 840,000 tonnes. Yesterday’s USDA supply demand report included a 2.1% increase in US 2023/24 sugar imports and an 0.8% increase in production, which would the US stocks/usage ratio at 13.5% from 10.6% in the June report.


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