India Sugar Ban Bullish

SUGAR

News that India will ban sugar exports for the 2023/24 season starting in October, the first time in seven years, sparked a sharp rally in sugar on Wednesday. This was rumored yesterday but was confirmed overnight. The government stated they intend to fulfill local sugar requirements and produce ethanol from surplus. Monsoon rains in Maharastra and Karnataka, which together account for more than half of India’s sugar output, have been as much as 50% below average this year. The patchy rains would cut sugar output in the 2023/24 season and reduce plantings for 2024/25. Sugar production could fall 3.3% to 31.7 million tonnes in 2023/24. India is heading for its driest August in more than a century, with the first 17 days of the month experiencing 40% below normal rainfall. Meteorologists had been expecting it to be 8% below normal. They expect scant rainfall to persist, partly due to El Nino.

COCOA

Cocoa’s lukewarm reaction to Wednesday’s risk-on mood may indicate that demand concerns are more prevalent than thought. The market has not had a positive day since last Thursday, despite a bullish supply outlook. Chinese economic and financial woes have cast a shadow over Asian demand prospects, and the disappointing PMI data this week raises concerns about Europe and North America. There are also reports that stockpiles are high in the US and that some warehouses in the east and northeast are leasing additional space. Recent rainfall over West African growing areas is seen as beneficial to 2023/24 production, but El Nino normally brings drier than normal conditions to the region, which could lower output considerably. Harvesting of the 2023/24 main crop has begun in Nigeria. Recent rainfall has helped the development of the crop, which has bigger beans and weighs more than the main crop did last month, according to growers there. However, StoneX reports that crop surveys in West Africa “aren’t looking great” after heavy rain knocked cherelles and young pods down from trees.

COFFEE

December coffee extended its rally overnight, as the market benefited from a continuation of the risk-on mood and yesterday’s strength in the Brazilian real. This rally in the Brazilian currency has eased pressure on growers to market their remaining coffee supplies. Somar Meteorologia reported that Mina Gerais, which accounts for about 30% of Brazil’s Arabica production, received no rain last week. There is some daily rainfall in the forecast from Saturday through next Wednesday, which may slow down their harvesting pace a bit. Brazil’s coffee export cooperative Cooxupe reported that Brazil’s harvest was 87.3% completed as of August 18 versus 85.5% a year ago.

COTTON

December cotton extended yesterday’s breakout rally overnight, as the market continues to be pulled between concerns over the US crop and worries about demand. US & Texas crop conditions are at or near record lows, and the extreme heat across many of the nation’s cotton producing areas leaves little opportunity for improvement. The US dollar traded to its highest level since early June yesterday but closed lower, which could be supportive to cotton if it this action indicates a top. The dollar was higher overnight and it could meet a major inflection point at yesterday’s high. Traders have been concerned about demand, and a setback in the dollar would make US exports more competitive on the global market. If the US export sales report today shows a marked improvement in cotton sales from last week, this could also help the market overcome its demand concerns.

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