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Choppy Ahead of Unica Report


Rains expected this week in Center-South Brazil may delay the 2024/25 cane harvest, but they could also be good for the crop. The first-half March Unica report showed cane crushing was running well above last year’s levels. The next report, covering the second half of March, will be released later this week. Those totals will count toward the 2023/24 season, but if harvest and crushing operations remain at high levels, it would suggest that the 2024/25 season has gotten off to a strong start. India and Thailand have seen increased production during the first quarter, which has pressured the market recently. Indian sugar refiners last week requested that the government lift their ban on exports and allow 1 million tonnes exit the country, but the government has made no move to do so. Russia is reported to be banning sugar exports until August 31. The French Deputy Agriculture Minister said that French sugar beet farmers may use more pesticides due to a high risk this year of an attack by an aphid that causes yellows disease.


Cocoa was higher overnight and came close to testing last week’s contract and all-time highs. Ghana’s Cocoa and Coffee Board (Cocobod) announced that they would increase their fixed farmgate purchase price for cocoa beans by 58%. This was slightly larger than Ivory Coast’s 50% hike last week and was above initial expectations for a 50% increase, but it was well below the 187% increase in the futures prices since the start of the 2023/24 season in October. It is hoped that the price hikes will encourage farmers to sell more of their crops. Ivory Coast and Ghana are looking at sharp reductions in their production this season. Ivory Coast’s regulator, the Coffee and Cocoa Council, is asking buyers to wait for the midcrop harvest, which is just beginning, to get delivery of about 130,000 tonnes of cocoa beans they presold for the main crop.


July NY coffee extended its rally overnight to trade to its highest level since August 2022. The NY arabica futures have drawn support recently from extremely tight robusta supplies and fears of a drought in Vietnam that could keep output from the world’s largest robusta producer down for the second straight year. London robusta futures traded to all-time highs last week. Brazil is the world’s second largest producer of robusta coffee, and their harvest is expected to begin soon. Expectations that Central American (arabica) production will come in below last season’s levels has also supported NY prices following news that Honduran and Costa Rican exports from October through March were below last season’s pace. Brazil’s upcoming crop may not reach early trade forecasts due to recent heavy rainfall that reportedly damaged trees.


May cotton fell to the 200-day moving average on Friday and bounced off that area overnight. The market has been under pressure recently from expectations that US exports will meet steep competition from Australia and Brazil as their crops come in, but the steep selloff last week has left the market in oversold condition and receptive to a rally. Export sales last week were flat, and cumulative sales for the 2023/24 marketing year are running behind the average pace. December cotton was also under pressure on Friday after the bounce off a lower-than-expected plantings number the previous week. US soil moisture is much better than a year ago, with only 7% of US cotton production area experiencing drought versus 46% a year ago. In a Bloomberg survey for the USDA supply/demand report on Thursday, the average trade expectation for US 2023/24 ending stocks is 2.56 million bales, up from 2.50 million in the March update but down from 4.25 million in 2022/23. The net long is still near historic highs, which leaves the market vulnerable to heavy selling if support levels are taken out.


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