Brazil Rain Improves Crop Outlook

COFFEE

December Coffee was near unchanged  overnight at the bottom of yesterday’s range down-move. The arrival of rainfall (at last) to Brazil’s coffee-growing areas has improved the outlook for the crop after a drought earlier this year helped spark a move to 13-year highs. Traders and analysts have been repeatedly warning that the rains would be too late to save the crop or that the crops need consistent moisture going forward. It does appear that a rainy pattern has arrived. World Weather Service reported an increase in rainfall Wednesday and Thursday and said it was the beginning of a more active period that will bring frequent bouts of rain to key production areas through Monday. Showers will continue next week, but precipitation is expected to be more erratic and light. Robusta prices have been in a downtrend since peaking in September. Vietnamese cash sales have been slow, and there is talk that the urgency to buy new crop has eased on news that the EU may postpone it anti-deforestation rule. That rule was supposed to go into effect at the end of the year, and there are ideas that buyers booked product ahead of normal to beat the deadline. Also, the Vietnamese crop looks better this year after a poor season last year resulted a tight global supply situation. Tropical Storm Trami is expect to come near Vietnam’s central coast Sunday into Monday bringing moderate to heavy rain to the Central Highlands and Quang Tri, where some flooding may occur.  However, the storm’s winds are not expected to be strong enough to seriously threaten most coffee.

COTTON

December Cotton is slightly lower this morning after a reversal lower from a two-week high yesterday. The market may have been disappointed with the weekly export sales report, which showed steady improvement but still came up short of the type of sales typically seen when demand is strong. The dollar reached a three-week high this week, and this does not bode well for US export prospects, and US cotton sales already had low expectations given the sluggish Chinese economy, a strong Chinese crop, and competition from South America. A decline in Indian crop expectations lent support earlier this week. Cumulative US export sales for 2024/25 have reached 51% of the USDA forecast versus a five-year average of 63% for this point in the marketing year. The slow pace could open the door for USDA to lower its export forecast in upcoming supply/demand reports.

COCOA

December Cocoa sold off sharply today after opening below the 200-day moving average. The market closed below that line for the first time in the December contract’s history yesterday, and this sparked ideas that a downtrend was forming. Cocoa has been under pressure for the past couple of weeks as arrivals at Ivory Coast ports have started strong for the new marketing year. Last week’s arrivals totaled 93,000 tons, which was the highest for any week since January 2023. Cumulative arrivals since the marketing year began on October 1 reached 193,000 tons, up from 173,000 for the same period last year. World Weather Service expects periodic shower and thunderstorm activity to continue to impact cocoa areas from Ivory Coast to Cameroon and Nigeria during the next seven to ten days. Sufficient rain will fall to maintain favorable crop development conditions. Seasonal rains should begin to cut back in November, but the remainder of this month and the first days of November will likely see a the current pattern continue. Worries about too much rain have faded with the strong arrivals.

SUGAR

March Sugar is lower today after a selloff from a five-session high yesterday. Bullish traders were disappointed with the market’s failure to take out the October 18 high or to test trendline resistance in the face of news that Brazil’s supply was tighter than previously expected. Wilmar said this week that private Unica data showed a significant revision downward in 2023/24 ending stocks, putting supplies at the start of the marketing year the lowest on record at 900,000 tons. Analysts speaking at the Datagro Sugar Conference this week lowers their  expectations for 2025/26. Brazil’s has seen rain return this month after an extended drought, but this is not expected to help the current crop year. However, the pattern has clearly improved. World Weather Service expects center south Brazil to receive widespread rain over the next ten days, which will benefit the sugarcane crops for 2025.

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