Coffee Trades to New All-Time High

SUGAR

March Sugar pushed through the January 2 high overnight to trade to its highest level since December 17. The Brazilian real reached its highest level since November 26 yesterday, which lowers the incentive for Brazilian exports to sell. World Weather Service says rain will continue “a little too frequently’ in center west and center south Brazil during the next ten days to two weeks. This is the rainy season, which brings the Brazilian cane harvest to a halt, but it also should help support the crop for the 2025/26 crop year, which begins in April. The Brazilian analysis firm Green Pool said this week that they expect the global sugar balance to show a (modest) surplus of 2.7 million metric tons in 2025/26, up from a deficit of 3.7 million in 2024/25. They expect global production to increase by 4.5% to 202.0 million tons, the second highest on record, with higher output from Brazil, India, and Thailand. They look for Center-south Brazil production to come in at 41.6 million tons, up from 39.95 million in 2024/25, with the proportion of cane crushed for sugar to rise to 50.9% from 48% in 2024/25. (Recent trends for 2024/25 show a dramatic, late-season shift to ethanol.) Torrential rain and flooding in northeast Australia may have destroyed as much as 1 million metric tons of their cane crop, which would reduce Australia’s annual sugar output by about 130,000 tons. More rains are expected over the weekend and into next week.

COCOA

May Cocoa extended yesterday’s selloff overnight and came close to testing the early January lows. A source inside Cocobod told Reuters today that arrivals at official Ghanaian warehouses had reached 542,233 metric tons by the end of January, which puts the nation “within reach” of its official 2024/25 output target of 650,000 tons. Ghana’s 2022/24 production was 480,000 tons, the lowest in two decades. Traders had told Reuters that they had heard arrivals had reached about 550,000 tons as of mid-January, but they cautioned that the crop was heavily front-loaded and that arrivals could decline going forward.  World Weather Service says west-central Africa cocoa areas still need rain after the hot and dry trends in recent weeks. Most days during the next week will be wetter than the past couple days and regular rounds of showers and thunderstorms should occur near the coast. The rainy season is approaching.

COTTON

March Cotton was near unchanged overnight after an outside reversal lower yesterday. Some traders said there were concerns about a potential trade war with China, but the market action this seems to be a continuation of the downtrend that has been in effect for almost five months. China has been a major buyer of US cotton in the past, but not so much this year. Expectations for today’s US export sales report may be softer due to Chinese New Year last week. Last week’s report showed net sales of 318,642 bales (current and new crop combined) for the week ending January 23. Sales have average 300,600 for the past four weeks, which is the strongest four-week pattern since last May. However, cumulative sales were still only 9.290 million bales, the slowest pace since the 2015/16 marketing year. World Weather Service says wet conditions in center west and center south Brazil during the next ten days to two weeks could result in a sluggish harvest pace. They also said that drier weather is needed over an extended period of time to get early soybeans harvested and Safrinha cotton planted.  Rain will be needed during the second half of winter and early spring in the southwestern US, southern California and south and west Texas to ensure favorable soil moisture for spring planting. Eastern Australia cotton areas have endured some hot and dry weather recently stressing some unirrigated crops. Less heat is expected this week, although precipitation will continue limited with additional drying expected.

COFFEE

March Coffee gapped higher overnight and traded to a new all-time high for the 10^th time in 10 sessions. Traders are saying cash brokers are covering short hedges. Recent strength in the Brazilian currency (the real) allows cash sellers to be patient. World Weather Service is saying Brazilian states of Bahia, northern and eastern Minas Gerais, and Espirito Santo will see net drying during the next ten days to two weeks and that crop moisture stress will be on the rise in unirrigated fields. Temperatures will only be slightly warmer than usual. An active rainy season has given way to drier conditions recently. However the main weather concern is that the extended drought and record heat last year have already damaged the upcoming crop. Recent forecasts from Conab and Comexim have called for Brazil’s arabica output to be down 12%-12.4% in 2025/26, which is an off year in production cycle. Traders also told Reuters that Vietnam’s domestic coffee market has been active this week, after being quiet for Chinese New Year. They reports farmer selling but healthy demand as well. Vietnamese government data showed today that the nation exported 140,000 metric tons of coffee in January, which was down 41% from the same period last year.

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