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Holding Support Ahead of Unica Report


July sugar extended yesterday’s losses slightly overnight but held support at the March low, as trade may have grown cautious ahead of today’s Unica Brazil production report for the second half of March. This is the final report for the 2023/24 marketing year, but if it shows a strong harvest/crush pace, traders may view it as a positive indicator for the upcoming crop. Dry conditions in Brazil can allow for active harvest now, but they can also result in lower yields later in the season. Increases in Thai and Indian sugar production since the start of the year have been a source of pressure on sugar prices recently. This has sparked speculation that India might relax its export ban, but those ideas appear to have been quashed for now. Sugar processors last week petitioned the government to allow 1 million tonnes of exports, but this week a government source said they may want to divert more cane to ethanol production. Forecasts for a normal monsoon this summer have added to the bearish mood, but the nation is facing a possible severe heatwave ahead of that event.


July coffee was sharply higher overnight and reached its highest level since January 2022. The market is being supported by tight global supplies and concerns about the upcoming Brazilian crop, as well as fund buying. Dry weather in Vietnam has growers expecting the 2024/25 crop to be down significantly from 2023/24, which itself is expected to be down 20% from 2022/23. This has farmers holding off on marketing their remaining coffee supply as they wait on higher prices. Vietnam had to import approximately 200,000 tonnes in 2023 due to shortages from the previous crop, and that practice has continued this year. The key Arabica growing region of Minas Gerais, Brazil only received 2.5 mm of rain last week, 12% of the historical average, and this has raised concern about their upcoming crop as well. US daily coffee consumption hit the highest level in 20 years, according to the National Coffee Association.


July cocoa extended yesterday’s rally overnight to reach another new contract high. There were reports this week that Ghana’s Cocobod was in negotiations to delay the delivery of 150,000 to 250,000 tonnes of cocoa beans from this season to 2024/25. Earlier this week, Barry Callebaut reported sales volumes were slightly ahead of last year’s pace despite very high cocoa prices, and that has provided additional support. First quarter grinding data for Europe and North America are due to be released on April 18, and the trade is anticipating a decline from last year due to the shortage of beans. If the grindings data is down significantly, the trade will have to determine whether the slowdown reflects lower demand as well. A shift towards wetter weather in the West African forecast through late next week could start to weigh on prices.


With prices down 10% since April 1, July cotton may have fallen too far, too fast and could be due for a bounce. Yesterday’s USDA supply/demand report was hardly bullish, but it was not particularly bearish either. US 2023/24 ending stocks were left unchanged at 2.5 million bales versus an average expectation of 2.56 million. World ending stocks came in at 83.08 million bales versus 83.38 million expected and 83.34 million in March. Brazilian and Australian production were left unchanged, but Brazilian exports were increased to 11.7 million bales from 11.2 million in March, and Australia’s were increased to 6.00 million from 5.75 million. US cotton export sales had a bearish tilt, coming in at 81,500 bales for the 2023/24 (current) marketing year and 35,661 for 2024/25 for a total of 117,161. This was up from 107,779 the previous week but was the second lowest since February 29. Sales have reached 95% of the USDA forecast for the marketing year versus a five-year average of 101% for this point in the season. This suggests the USDA could lower its export forecast in upcoming supply/demand reports. The weekly drought monitor showed 11% of US cotton production was in an area experiencing drought as of April 9 up from 6% the previous week but down from 40% last year.


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