Hot Weather Supports Coffee Markets

COFFEE

Hot and dry weather forecast for Brazil’s Arabica growing regions has supported the coffee market this week. Somar Meteorologia reported Monday that Brazil’s Minas Gerais region received 2.5 mm of rain last week, 20% of the historical average. The region accounts for 30% of Brazil’s Arabica crop. Trees are entering the flowering period, when rain and mild temperatures are desirable to improve the next year’s crop. December coffee saw upside follow-through from a last week’s reversal and reached a new 5 1/2-week high yesterday before finishing with a moderate gain. The Brazilian real traded to its highest level since August 2, which is also supportive to coffee as that eases pressure on Brazilian growers to market their product. ICE exchange coffee stocks increased by 2,200 bags on Monday. Stocks fell to a 10-week low last week but have seen two sharp increases in a row.

COCOA

Cocoa’s steep selloff yesterday illustrates the difficulty of maintaining a positive demand tone while prices are at 44-year highs. Reports that Ivory Coast will resume forward sales of the 2023/24 crop if major European chocolate makers bear the cost of sustainable cocoa production may have been enough to trigger a wave of profit-taking and additional long liquidation. Recent rainfall over West African growing areas was seen as being beneficial to the region’s upcoming main crop, and that added further pressure. Cocoa arrivals at Ivory Coast ports totaled 6,000 tonnes for the week ending September 17, bringing the total for the 2022/23 season to 2.327 million, which is down 4.8% from the same period last year. With two weeks left to go in the marketing year, farmers may be reluctant to sell, as they expect higher minimum farmgate prices for 2023/24. Ivory Coast exported 1,305,714 tonnes of raw cocoa beans between October 2022 and July 2023, down 10% from the same period the year before, according to provisional port data. But they also exported 457,395 tonnes of semi-finished cocoa products for that same period, up 5.5% from the year before, as their domestic processing industry continues to grow. The ICCO said that processors in Asia have had to import beans from Ivory Coast, Ghana, and Ecuador due to sharp declines in production in the region, especially Indonesia.

COTTON

The US cotton crop showed very little improvement last week, and wet weather forecast across the south can do more harm than good at this point in the season. Demand is still a concern, but the trade will be watching conditions in Australia as their planting gets underway, with El Nino threatening to turn things dry. The weekly Crop Progress report showed 29% of the US cotton crop was rated good/excellent as of Sunday, unchanged from the previous week and down from 33% a year ago and the 10-year average of 47%. Texas was 10% G/E, up from 9% last week but still the lowest on record. Poor/very poor ratings increased to 43% nationally from 41% last week and 21% on average. Texas was 65% P/VP versus 61% last week, and this is a new record. The report also showed 55% of the US crop had bolls open, and those crops could be vulnerable to quality damage if they experience heavy rainfall. The crop was 9% harvested. The 6-10- and 8-14-day forecasts show above normal chances of rain across most of Texas, the Delta, and the Southeast. El Nino can bring dry conditions to Australia, and the announcement last week that the event could last through March means it would extend through their growing season. There were reports last week that buyers have been stockpiling Australian cotton in Chinese warehouses, betting that a three-year ban on imports will soon be lifted. Australia had been a key supplier of cotton to China, and the ban has shifted some of that demand to the US. China has the largest importer of US cotton in 2022/23 and is the largest buyer so far for 2023/24.

SUGAR

A slight improvement in the Indian monsoon rainfall this month has not deterred the sugar market bulls, as March sugar followed a negative reversal on Friday with a modest recovery on Monday. Thailand’s 2023/24 crop has already been revised lower, and India’s is also in question. India’s second-half August monsoon rainfall was a record low, and it will take a big improvement this month to make up for the deficit. Crude oil and gasoline have reached new highs for the year this week, which lends support to sugar on ideas it will strengthen ethanol demand. A new 5 1/2 week high in the Brazilian real provided the sugar market with additional support, as that should ease pressure on Brazilian mills to produce sugar for export. Brazil’s major cane-growing regions have mostly dry weather forecast through the middle of next week, with daily high temperatures above 90 degrees Fahrenheit. This should minimize delays to harvest and crushing activity, but it could also hurt yields on late-harvested cane. China’s August sugar imports totaled 370,000 tonnes, 46% below last year. This put their total for 2023 so far at 1.57 million tonnes, 42% behind 2022. The European Union’s crop monitoring service increased its sugar beet yield outlook to 74.5 tonnes per hectare, up from 73.7 projected last month.

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