Cotton Awaits Trump–Xi Talks

COTTON

December Cotton’s reaction to the sharp rally in crude oil and the news that President Trump will meet Chinese President Xi Jinping next week as part of his trip to Asia has been muted. The two leaders are scheduled to meet Thursday morning local time, which will be late Wednesday in the US. Higher crude oil prices increase the cost for man-made fibers like polyester and therefore support cotton demand. There have been hopes that a trade agreement between the US and China could benefit US exports. The last export sales report released before the US government shutdown showed that as of September 18, China had purchased 69,500 bales so far for the 2025/26 marketing year versus a five-year average of 1.697 million for this point in the season. It was their slowest start in more than 11 years. China is the 13^th largest buyer of US cotton so far this year. The biggest is Vietnam at 975,100. China’s crop is reportedly in good shape, which will limit their import needs. On the other hand, any positive outcome from the meeting could improve the global economic outlook and attitude towards textile demand.

COCOA

The 36% decline in prices from the August high to the October low may have attracted cash buyers as well as inspiring short covering, and the rally this week has allowed the market to correct a short-term oversold condition. The slow start for Ivory Coast port arrivals may have also had something to do with the rally. As of Sunday October 19 (just two weeks into the new marketing year), cumulative arrivals had reached 132,000 metric tons versus 193,000 a year ago and a five year average of 232,200. Arrivals for the week totaled 84,000 tons versus 93,000 the same week last year and a five-year average of 89,000. It is still very early in the season, and there is time to catch up. News this week that the EU may adopt a 6-month delay to the EU deforestation rules instead of a one-year delay that had previously been proposed shortens the timeline for potential supply disruptions. Under the rules, exporters need to provide documentation verifying that that product did not come from deforested lands, and there is debate over whether the infrastructure is in place for verification. The rules were supposed to go into effect at the end of this year, having already been delayed a year. Ghana is seeking a $200-a-ton premium for sustainably grown and traceable cocoa. Demand appears to be not as bad as feared. Asia’s grind was -17.1% from a year ago in the third quarter, which was slightly worse than being  -15.5% in the second quarter, but Europe’s 3Q grind was down 4.8% versus -7.2% in 2Q, and North America’s was +3.2% versus -2.8% in 2Q. For the three areas combined, grind was -7.5% versus -9.2% in 2Q. Growers in Ivory Coast and Ghana have been very optimistic about production of late. Ghana’s agricultural minister this week indicated that their 2025/26 production will surpass the initial projection of 650,000 metric tons and up from 500,000 tons in 2024/25.

SUGAR

March Sugar traded to another new contract low overnight, and the nearby contract is threatening to take out its four-year low from June. Expectations for a global sugar surplus continue to weigh on prices. This week Datagro projected a global surplus of 1.98 million tons in 2025/26 (October/September) up from a deficit of 5 million in 2024/25. No significant production threats have emerged this year, and long-term demand expectations are weighed down by the success of new GLP-1 weight-loss drugs. The market did not even benefit from the steep rally in crude oil this week, despite the implied improvement in the incentive to use sugar cane for ethanol instead of sugar. To put things in perspective, this week’s rally only put crude oil prices back to where they were in September, still the low end of a five-year range, which does not really change the incentive structure. In the recent UNICA report, sugar was averaging a 53% share of the crush this year versus 48% last year. Conditions have been dry in Center-South Brazil recently, but that could change. World Weather Inc. says the models project a greater, more-beneficial rainfall to arrive in in the October 30-November 7 time-frame.

COFFEE

December Coffee reached new contract high this week after President Trump threatened high tariffs on Colombia, the second largest supplier of coffee to the US. This comes as the trade is hoping for a reduction in the 50% tariffs the US has placed on imports from Brazil, traditionally the largest supplier of US coffee. There has been talk that Trump and Brazilian President Lula da Silva could meet at the ASEAN summit in Malaysia next week to discuss a solution, but there has been no official announcement. Brazilian growers may be reluctant to sell their coffee on the world market if they think the tariff will be lifted, but they will have to do so eventually. And at some point, high prices may eat into demand. ICE certified stocks fell another 3,104 bags yesterday to 462,806, their lowest since March 13, 2024. Brazil’s 2026/27 crop is starting off with to 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 this year. This pattern could start to change in the first days of November. A tropical storm hit Vietnam this week, but does not appear to have caused any serious damage to their crop.

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