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Cotton Market Weaker


A slight decline in cotton crop conditions did little to support the market overnight, and it may take a more drastic change to shake prices out of their 6-month trading range. The market was weaker on Monday on what seemed to be pressure from outside forces like weak energy prices and a stronger dollar rather than any market fundamentals. The weekly crop progress report, released Monday afternoon, showed 49% of the US cotton crop was rated good/excellent (G/E) as of June 11, down from 51% the previous week but above the 10-year average of 48%. The forecast for west Texas shows above normal temperatures and below normal chances for rain over the next seven days. Soil moisture is expected to show a moderate decline, which could allow crop concerns to re-emerge. The 6-10 and 8-14-day forecasts call for above normal temperatures and normal to below normal chances of rainfall for the region, which lowers the chances of improvement for the next two weeks.


Cocoa continues to receive bullish supply/demand news, but it has gotten overbought and may be vulnerable to further downside action in the wake of a lower close yesterday after putting in a new contract high. The market avoided a key reversal yesterday, and we are reluctant to call a technical top. Cocoa arrivals at Ivory Coast ports for June 5-11 were estimated at 32,000 tonnes, up from 31,000 for the same week last year. Total arrivals since the season started on October 1 have reached 2.136 million tonnes, down 4.4% from the same period last season. The fact that last week’s arrivals were roughly in-line with the comparable period last year may have surprised traders given the heavy rainfall over southern and western growing areas last week. There are reports of flooding near the Ivory Coast port of Abidjan, and that could reduce this week’s cocoa arrivals. And after dry weather today and tomorrow, daily rainfall is expected to return to cocoa growing regions and last through the middle of next week. This could benefit late mid-crop cocoa production, but it could also slow arrivals.


Dry weather over Brazil’s major Arabica growing region is helping speed up this year’s harvest, which should help alleviate tight supplies. ICE exchange coffee stock fell 25 bags on Monday, which is one of their smallest declines in quite a while, and this may have some coffee market bulls concerned that the pace of stock levels declines is slowing. El Nino is expected to bring heavier than normal rainfall to Brazilian growing regions, and that could hurt the 2024/25 crop that will not be harvested until next year. Global robusta coffee stocks remain low, and that can provide underlying support to New York coffee prices. Nearby robusta prices reached their highest levels since the 1990s earlier this month, and this lent support to Arabica (NY) coffee prices. Global out of home coffee consumption has been hurt by high inflation over the past few years, so stronger than expected CPI results today could put additional pressure on coffee prices.


Sugar prices managed to avoid large downside follow-through from last Friday’s reversal after reports from India that they may extend their current export embargo well into the 2023/24 season. The latest Unica Center-South cane crushing and sugar production update is due out today, and it will cover activity for the second half of May. From April to mid-May the crush was running 24% higher than last year, and overall sugar production was 48% higher. With only a few days of operations lost to wet weather, we expect the numbers for the second half of May to come in well above last year. The USDA has forecast India’s 2023/24 sugar exports to total 7 million tonnes 24, well below their record high of 11.93 million from 2021/22 but 850,000 higher than 2022/23.


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