ADMIS News
COTTON
May cotton was higher overnight after bouncing off retracement support and the 50-day moving average yesterday. The market may be headed for some consolidation ahead of the USDA Prospective Plantings report on Thursday. Keep in mind that US soil moisture has improved much over last year, with only 7% of US cotton production area currently under drought versus 46% a year ago, and that could encourage heavier plantings. For the report, the average trade expectation for US 2024/25 cotton planted area is 10.906 million acres, with a range of expectations from 10.241 million to 11.300. This compares to a forecast of 11.0 million from the USDA outlook forum in February and 10.23 million for 2023/24.
COCOA
May cocoa traded through the $10,000 level overnight, but it has fallen back to lower on the day. Attaining a such landmark price may encourage profit taking. The chart action has gotten very steep, and traders could be concerned that the rally has reached exhaustion. Commercial buyers appear to have been the key drivers of the rally, with open interest declining for the past two months and the fund net long shrinking to 27,000 last week from 71,000 in early January. This could leave the market less vulnerable to panic selling. The West African supply situation remains extremely tight going into the start of the mid-crop harvest next week. There are reports that Ghana’s Cocobod has been unable to access a second loan tranche of $200 million. To some degree, demand concerns may be pushed into the future, when beans purchased this month are part of chocolate products on store shelves. However, high cocoa prices are encouraging chocolate makers like Hershey and Mondelez to pitch more non-chocolate Easter treats this year.
COFFEE
May NY coffee was higher overnight, but it remains in a consolidation pattern. Reports of a heat wave hitting Vietnam is raising concerns about their upcoming robusta crop after dry conditions last year severely lowered production. There are reports that recent rainfall has been at the lower end of the 10-year range and that temperatures are on the higher side. Near-term supply for robusta coffee remains tight, and Vietnamese farmers have been reluctant to sell their remaining supply. May London (robusta) futures traded to a new contract high overnight, and the nearby contract reached its highest level since 1994. This should lend support to the NY (Arabica) market as well. Slightly above-average rainfall over Brazil’s Arabica growing regions last week should benefit their upcoming crop. However, there were reports of storms causing fruits to drop from trees.
SUGAR
Rainfall in the forecast for Brazil’s Center-South cane growing regions is expected to delay the start of this year’s harvest, and that has lent support to the sugar market this week. Crop expectations are already down due to the extended dry pattern the region has seen over the past several months. There has been talk that Brazil’s Center-South mills will increase sugar’s share of crushing next season, as stronger ethanol demand will be met by an increase in corn-based ethanol production. However, crude oil prices recently reaching their highest level since October is supportive to ethanol demand and sugar as well. Analysts have modestly increased their forecasts for 2023/24 production in Thailand and India, and the expected end to El Nino this year could improve their prospects for the upcoming crop. Brazilian 2024/25 prospects have been revised down.
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