India Restricts Ethanol Production
March sugar was higher overnight after yesterday’s steep selloff, but technical damage from a break below the 200-day moving average will likely keep the bears in control. Overnight it was confirmed that the Indian government has directed sugar mills to not use sugar cane for ethanol production as part of an effort to ensure sufficient supplies of sugar. Rumors of this possibility were behind the steep selloff yesterday. The Indian ethanol industry had been ramping up production facilities to meet the government’s gasoline blending requirements. Brazil remains on course for record production this year, and this continues to be a major source of pressure on prices.
Coffee’s wide-sweeping, two-sided trading action since the end of November may be a sign that a long-term top is in place. Brazil’s port congestion has been easing, as indicated by their November coffee exports coming in above last year. Itau BBA said that Brazil’s 2024/25 coffee production will be in-line with this season. Last month’s high temperatures caused fruit to fall from coffee trees earlier than normal, and this has encouraged some forecasters to lower their expectations. Costa Rican November coffee exports were 37% higher than the same period last year, more evidence of better Central American production this season. ICE exchange coffee stocks increased 5,358 bags on Thursday for a second increase in a row. However, 27% of the coffee that went through the grading process failed the approval process.
March cocoa gapped higher overnight on renewed concern about west African production. Ghana’s marketing board COCOBOD reported that graded and sealed cocoa arrivals have dropped roughly 51% from a year ago this season. As of November 23, arrivals since the start of the harvest on September 8 had reached 189,470 tonnes, down from 383,496 for the same period last year. COCOBOD has forecast Ghana’s production at 800,000 tonnes for 2023/24, but industry sources say they expect harvest to be closer to 600,000. Ivory Coast’s cocoa regulator, the Cocoa-Coffee Council, announced it had halted sales of cocoa export contracts for the 2024/25 season due to concerns over production. A spokesman said they are worried about the causes of the drop in production and the size of this season’s harvest. Rabobank has forecast a global production deficit of 160,000 tonnes in 2023/24 due to declines in Ghana and Ivory Coast, adding that a Harmattan season with strong winds could make the deficit much bigger.
March cotton seems to be consolidating ahead of the USDA reports on Friday after a quick, two-day rally this week off a 93% decline in ICE certified cotton stocks. A good portion of the ICE stocks were decertified and delivered to Galveston and were likely intended for export. Traders will be waiting to see if there is any improvement in weekly export sales in this morning’s report. Last week’s report showed net sales of 233,062 bales, which was decent, but it was down from 327,932 the previous week and the lowest since October 19. The trade is not looking for many changes in Friday’s USDA Crop Production and supply/demand reports.
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