Cocoa Hits 3-Week High on Tight Supply

COCOA

December Cocoa extended its recovery rally overnight and traded to its highest level since October 2. The slow start to Ivory Coast cocoa arrivals has traders concerned their output may not be as strong as have been recently touted. There are also reports of poor quality beans. That and an oversold technical condition have left the market vulnerable to a bounce. Growing conditions have improved over the past several weeks, but an extended dry spell that lasted into the first part of September may have slowed pod development. News yesterday that the EU may adopt a 6-month delay to the EU deforestation rules rather than the 1-year delay that had previously been proposed increases the possibility of supply disruptions next year. Under the rules, exporters need to provide documentation verifying that that product did not come from deforested lands. The rules were supposed to go into effect at the end of this year. Ghana is already seeking a $200-a-ton premium for sustainably grown and traceable cocoa. Ghana’s agricultural minister forecasted yesterday that the nation’s 2025/26 cocoa production will surpass the initial government projection of 650,000 metric tons due to good weather and crop renovation work. (This would be up from 500,000 tons estimated for 2024/25). ICE stocks decreased by 3,678 bags yesterday to 1.855 million, the lowest since April 4. Ecuador has released the survivor of a US strike on a submarine alleged to have been smuggling drugs in the Caribbean, with the Ecuadorean Attorney General’s office stating that the survivor could not be detained because there was no report of a crime. Will this cause  the type of friction between the US and the world’s third-largest cocoa producer as it has with the two largest providers of coffee to the US?

SUGAR

March Sugar is a little higher this morning but inside yesterday’s move to new contract lows. Datagro is forecasting Brazil’s 2025/26 Center-South sugar production at 41.42 million metric tons, up 3.1% from 2024/25, and they are projecting 2026/27 production at 43.2 million. The current-year production numbers imply a continued improvement in output for the remainer of the year. The recent UNICA report had cumulative production as of October 1 for the 2025/26 marketing year (April/March) up 0.8% from last year, which was a dramatic improvement from being down 12% at the beginning of August. Datagro also projected a global surplus of 1.98 million tons in 2025/26 (October/September) up from a deficit of 5 million in 2024/25. Brazilian sugar producer Raizen reported that it crushed 35.1 million tons of cane in the second quarter of the 2025/26 crop, up 6.7% from the same period a year earlier. Sugar equivalent production reached 4.8 million tons, up 30% from the previous year. Sugar’s share of production was 56% versus 52% a year earlier. World Weather Inc says Brazil sugarcane areas need rain.

COFFEE

December Coffee extended its rally overnight to new contract highs, and the nearby contract reached its highest level since putting in an all-time high last February. The top two sellers of coffee into the US, Brazil and Colombia, are now looking at punitive tariffs. Since the US imposed a 50% tariff on Brazilian imports in August, ICE exchange stocks have fallen precipitously, and coffee prices have increased 40%. ICE certified stocks fell another 2,500 bags yesterday to 465,910, their lowest since March 13, 2024. This week, President Trump cast his ire at Colombia over a dispute about the US attacks on boats in the Caribbean, threatening to hit that nation with large tariffs as well. The US gets about one-third of its coffee beans from Brazil and about one-fifth from Colombia. The US currently imposes 10% tariffs on Colombian imports. On the Brazilian tariff front, there are hopes that President Trump and Brazilian President Lula da Silva will meet at the ASEAN summit in Malaysia to discuss a solution. In the meantime, Brazilian producers are probably reluctant to sell their newly harvested coffee as long as they think a lower tariff is possible. If no agreement is reached, Brazilian growers will still have coffee to sell, either to the US under the heavy tariff or to the rest of the world. Brazil’s 2026/27 crop is starting out in less than ideal conditions. World Weather Inc says coffee production areas have not received the kind of rain needed to induce the best flowering, pollination and cherry setting conditions. They also say that precipitation will be limited for the next four to five days before scattered showers will evolve. Better chances of rain emerge in November. Uganda is projecting its 2025/26 coffee production at 9.3 million bags, up from 9 million the previous year. They are the leading exporter in Africa but produce mostly robusta beans. Reuters reports that robusta prices in Vietnam rose this week on limited supplies from the new harvest.

COTTON

December Cotton has given back about half of the gains is saw after bouncing off contract lows last week. With no updates on crop conditions or export sales, the market is left with the strong crop/poor export indicators that prevailed prior to the government shutdown. There may be some hope that President Trump and Chinese President Xi will reach some sort of trade agreement if and when they meet in South Korea next week. If there is a breakthrough, the headline story will be in soybeans, but cotton traders cannot resist holding out hope that it will open the door for cotton purchases as well. Prior to the shutdown, US cotton commitments were the lowest in 11 years, and the pace relative to the USDA forecast was well behind average. This is not to say that sales haven’t improved…we just don’t know. The dollar fell to its lowest level in 3 ½ years in September, which along with low prices at least makes US cotton competitive on the global market.

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