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Corrective Rally in Sugar Ahead?


July sugar has held in a relatively narrow zone for the past three weeks and could be building a base for a corrective rally. The Brazilian real saw a sharp rally on Friday to a three-week high, which provides some support to sugar on ideas it will ease pressure on Brazilian mills to market their product aggressively. Ukraine’s national sugar union Ukrtsukor said Ukraine could increase its white sugar production by nearly 3% to 1.85 million tonnes in 2024, and the exportable surplus could total 950,000 tonnes for the 2024/25 season. The European Commission on Friday forecast 2024/25 EU sugar beet planted area at 1.495 million hectares, up 2.3% from last season. They also expect beet yields to hold steady with last year, which would lead to a 7% increase in sugar production 15.6 million tonnes. Russia has imposed a ban on sugar exports effective today and lasting through August 31. Brazil’s Center-South cane growing regions have mostly dry conditions in the forecast through early next week, which should minimize any delays to harvesting and crushing and keep production running at high levels.

sugar cane in field


At Friday’s low, July cocoa had given back 50% of the rally from the contract low in September 2022 to last month’s contract high, and this could provide support considering the supply/demand picture is still tight. Also, the nearby contract fell to the 0.382 retracement of the rally from June 2017 low of 1769. Ivory Coast cocoa arrivals reached 25,000 tonnes for the week ending May 5, down from 38,000 from the same week last year. Cumulative arrivals since the marketing year began on October 1 have reached 1.379 million tonnes, down 29.1% from the same period last year. The market found support on Friday after Hershey reported better than expected earnings and revenues for the first quarter. West African growing areas have rainfall in the forecast for most days through early next week, which should benefit their late mid-crop production and next season’s early main crop output.


July coffee found support at the 50-day moving average on Friday following a 45.35-cent, 18% decline from the contract highs. Traders are attributing the steep selloff to fund liquidation but also improved weather conditions in Vietnam after recent rainfall in the Central Highlands have boosted confidence in coffee yields. There is also harvest pressure from Brazil. ICE exchange arabica stocks increased by 7,142 bags on Friday to reach a new 11-month high. The International Coffee Organization reported that world coffee exports rose to 12.99 million bags in March versus 12.02 million a year earlier. Arabica exports rose 9.7% from a year earlier, and robusta exports were up 6.7%. Exports from October through March were up 10.4% from the same period a year ago to 69.16 million bags.


An outside reversal higher in July cotton on Friday could provide the market with some support for a change. July fell to its lowest level since November 2022 on Friday, down 27% from the contract high from February. The market seems to have has been drained of any sort of weather premium, which may be a bit risky at the start of the growing season. We may also see some choppy action ahead of Friday’s monthly USDA supply/demand report, which will have the first official US and world numbers for the 2024/25 marketing year. The March USDA prospective plantings put US cotton plantings this year at 10.67 million acres, up from 10.23 million last year but down from 13.75 million two years ago. This would still be the second lowest since 2016/17. Last week’s US Drought Monitor showed 8% of US cotton production was in an area experiencing drought versus 38% a year ago and 56% two years ago, which suggests the US crop could get off to a strong start. A report out of India overnight said business volume was extremely low, that there is a slump in demand and that many mills are attempting to sell pre-purchased cotton.


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