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Brazil Harvest Ahead of LY


With the bearish shift in the Brazilian supply outlook, coffee could see further downside ahead. Brazil’s current Arabica harvest has seen few delays after a slow start, and that has pressured the market. Recently, Brazil’s top Arabica cooperative Cooxupe reported that 17% of the harvest was complete as of June 9 versus 13% a year earlier. Above normal rainfall over Brazil’s major Arabica areas last week is expected to benefit the 2024/25 crop. The updated forecast has little chance of frost conditions that would damage coffee trees, and most producing regions are expected to be warmer after some cool temperatures over the weekend. A pullback in the Brazilian currency has also weighed on the coffee prices on ideas it could encourage Brazilian producers to aggressively market their supply to foreign customers.


Cocoa has been pressured by a negative shift in global risk sentiment this week. Pullbacks in the Euro and British Pound and losses in European and US equity markets pressured the market on Tuesday on ideas it would diminish the near-term demand outlook in Europe and North America. The pound was down again overnight after a British inflation number came in hotter than expected. Nigerian officials said they expect their 2023/24 main crop to have a good harvest, and that weighed on prices as well on Tuesday. El Nino normally brings drier than normal conditions to West Africa, which would have a negative impact on cocoa trees. However, below average rain in most of Ivory Coast’s growing regions last week could benefit the crop by helping to prevent disease after weeks of rain. The extended forecast calls for daily rainfall for most West African growing regions through the middle of next week. This could result in additional delays to the harvesting, drying, and transporting of beans to port facilities.


Cotton crop conditions declined slightly last week, and though that may not be enough of a change to spark a big rally, it may be enough to keep the market from pushing below the low end of the recent trading range. The weekly Crop Progress report released Tuesday afternoon showed 47% of the US cotton crop was rated good/excellent (G/E) as of June 18, down from 49% the previous week but up from 40% a year ago and just below the 10-year average of 48%. The report also showed 89% of the US crop was planted as of Sunday, down from 95% a year ago and below the 10-year average of 93%. The Texas crop is considerably better than last year but it is still below average, and conditions in West Texas could decline in the next couple of weeks. If the India monsoon develops this week as expected, it could ease concerns about their crop.


Sugar prices remain near the upper portion of their July range, but they have struggled to climb above the late April highs, and with a change in India’s weather, the market could see a sharp turn to the downside. The Indian monsoon is roughly 10 days behind schedule, but there are indications that it will regain momentum by the end of this week. This would ease concerns about India’s cane crop, especially for the top-two cane-growing states of Maharashtra and Uttar Pradesh, which have been particularly impacted by the delay. So far, the India Meteorological Department has not changed its forecast for a “normal” monsoon rainfall total this year. However, if El Nino turns out to be strong, it could raise the risk of drought. The Brazilian firm Copersucar forecast their 2023/24 cane crushing to increase 12% from last year. There have been reports that port lineups in Brazil have been declining for the last five weeks, which is concerning to the bulls as it suggests export demand is ebbing.


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