Coffee Futures Extend Selloff

COFFEE

December Coffee was lower early Tuesday, outside Monday’s range, in what appeared to be a continuation of Monday’s selloff. The market made an attempt to close the gap from Monday but failed. the Brazilian real was close to unchanged overnight after bouncing off its lows on Monday, but it was still reflecting massive losses from Friday, and this keeps pressure on Brazilian exporters and growers to sell future as hedges. ICE certified arabica stocks fell 2,368 bags on Monday to 225,610, their lowest since September 15 when stocks were down to 217,646, a 26-year low, but that does not reflect the incentive to sell off the currency movement.

SUGAR

March Sugar was near unchanged early Tuesday and managing to hold Monday’s low. The Brazilian real was steady overnight and this may have stemmed the selling in sugar. Brazil is the world’s largest sugar exporter, and the collapse in the currency on Monday encouraged hedge selling by exporters and producer. The currency move does not take away from the tightening supply outlook with poor crops in Europe (beets), India and Brail this year. Rain in Sao Paulo this week may be favorable to cane, but it could also bring an early end to the harvest season. The recent Commitments of Traders Report showed managed money traders were net long 269,008 contracts, which was a new record and left the market vulnerable to heavy selling. Thailand’s production is still threatened by El Nino, but so far they have managed to avoid the event’s wrath.

COCOA

December Cocoa was slightly higher early Tuesday after falling to its lowest level since October 8 on Monday. The market may have felt some pressure from the collapse in the Brazilian real on Monday, but Brazil has a much smaller role in global cocoa production than it has for sugar, cotton, or coffee. They are the seventh-largest cocoa producer in the world and represent about 4% of global output. West Africa is getting drier, but that is not unusual for this time of year. The arrivals data point to a slow start for Ivory Coast production this season. Reuters is estimating Ivory Coast port arrivals for the week ending October 25 at 44,000 metric tons, up from 37,000 the previous week but down from 82,000 a year ago. Cumulative arrivals since the marketing year began have reached 158,500 tons, down from 214,000 at this point last year and below the five-year average of 259,600. Farmers interviewed by Reuters said rain was below average last week in most cocoa-growing regions, but it was good enough to support main crop production. The rainy season typically runs to mid-November. Farmers expect harvesting to pick up sharply starting next week and peak in December.

COTTON

December Cotton was lower early Tuesday but did manage to bounce off the 200-day moving average, a line the market has more or less held since March. With US harvest more than 50% complete, the trade is expecting harvest pressure to continue this week. Monday afternoon’s Crop Progress report showed 52% of the US cotton crop had been harvested as of October 25, up from 41% the previous week and above the five-year average for this date at 45%. Texas, Mississippi and Arkansas are well above the average pace. The report showed 33% of the US cotton crop was rated good/excellent as of October 25, down from 35% the previous week. Texas was 18% G/E, unchanged from last week, but we are getting to a point where conditions lose their significance. The dollar was higher overnight, which also raises concerns that US cotton will be less competitive on the global market.

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