Brazilian Rain May Slow Cane Crush

SUGAR

Brazilian production is running well ahead of last season’s pace, but above average rainfall is expected in Brazil’s Center-South region from September through November, which could slow the cane crushing pace. This could allow concerns about Indian and Thailand production to return to the forefront. The Brazilian trade group Unica reported yesterday that Brazil’s Center-South sugar production during the second half of August was 3.461 million tonnes, slightly above trade forecasts and up 9.95% from last year. Cane crush was 46.515 million tonnes, which was slightly below expectations but up 5.22% from a year ago. Sugar’s share of crushing during was 50.73%, up from 48.45% last year and the fourth bimonthly reading in a row above 50%. Brazilian domestic ethanol sales for August were 5.69% above last year, for their first year-over-year increase since May. Low monsoon rain totals in India and dry conditions in Thailand could keep the sugar market well supported on breaks.

COCOA

With few signs of production improvement from its major growing nations, cocoa prices are likely to climb further to the upside. West African supply problems are expected to continue through the second quarter of next year, as El Nino threatens to bring drier than normal conditions to the region. Ivory Coast’s 2023/24 full-season production may be more than 400,000 tonnes below this season’s output, which on its own would account for an 8.5% decline from the 2022/23 global production total. Ivory Coast cocoa farmers are asking for a 44% increase in the minimum farmgate price for the 2023/24 marketing year, which begins on October 1. This follows a recent 64% increase for Ghana’s producers.

COFFEE

Coffee has lost upside momentum after Monday’s outside-day higher, leaving the market vulnerable to a pullback. Restaurant and retail shop consumption has benefited from the longer-term decline in inflation, and Wednesday’s US CPI result appeared to put only minor pressure on coffee prices. A rally in the Brazilian currency to a 1 1/2 week high provided additional support yesterday on ideas that it reduces pressure on growers to market their product. The Brazilian trade group Cecafe reported their nation’s Arabica exports totaled 3.35 million bags in August, 11.2% above a year ago. Robusta exports reached a record 2.65 million bags. ICE exchange coffee stocks were unchanged on Wednesday, leaving them at their lowest level since November.

COTTON

With the USDA supply/demand report behind us, traders will be looking for indications of improving demand from this morning’s weekly Export Sales report. Tuesday’s supply/demand report was mixed, with US 2023/24 ending stocks coming in lower than last month but above expectations. Texas’s crop was left unchanged despite crop conditions being historically poor. West Texas is expected to see above average rainfall over the next seven days, and this may be seen as the last chance for the crop to recover. Last year, the Texas abandonment rate was 75%, but the projection this year is only 36%, even though crop is in worse shape. Planted acreage was lower this year, which suggests fewer “marginal” acres were planted, so the abandonment rate could be smaller, but half? This seems to leave room for further reduction in the crop in future updates. The other factor is demand, especially from China. There were reports this week that China could start accepting Australian cotton again after a three-year hiatus, which could eat into US sales.

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