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July Coffee Falls to Key Support Area


At the overnight low, July coffee was down 53.25 cents (22%) from its April 18 contract high, and it had fallen to the top of an extended consolidation pattern that could be a key support area. London coffee gapped lower overnight after being closed for the May Day holiday yesterday, and it traded to its lowest level since March 22, down 25% from the April 25 high. Concerns over hot and dry conditions in Vietnam supply had underpinned coffee prices until recent rainfall and strong competition from Brazil sent local prices lower. ICE exchange arabica stocks fell 2,220 bags yesterday after reaching their highest level in 11 months at 689,178 bags on Friday, but the number of bags pending approval jumped to 117,977 bags from 85,853 on Friday. The buildup reflects ample near-term supply and lukewarm demand. Central American exports last month came in higher than last year’s levels, which reflects improved production.

coffee beans close up


Recent rainfall in West Africa has eased the worst fears about the mid-crop, but growers are still concerned about the damage done by the excessive heat earlier this year. The latest weekly reading for Ivory Coast port arrivals came in below the same period for last year and kept their full season total far behind last season’s pace. Hershey and Mondelez have reported positive earnings for the first quarter, but they have expressed concern that high cocoa costs will weaken demand in the second quarter. Ivory Coast cocoa exporters have asked to meet with the West African nation’s regulator to discuss financial support to cushion market turmoil.


Friday’s reversal higher from new low for the move was supportive, but we could see some back and forth ahead of the USDA supply demand report on Friday. July cotton closed lower yesterday after rallying to its highest level since April 30, but it held Friday’s low. The weekly Crop Progress report showed planting is proceeding swiftly, with 24% of the US cotton crop planted as of May 5, up from 15% the previous week and ahead of 20% a year ago and the 10-year average, which was also 20%. Texas was 24% planted versus 19% on average, Georgia 21% versus 16% on average, Arkansas 30% versus 24% on average, and Mississippi 32% versus 21% on average. Heavy rainfall in the Coastal Bend of Texas, the Delta, and the southeast US this week could slow plantings.


July sugar has been holding inside a tight, 0.95-cent range for three weeks, and it could be building a base for a rally or biding time for a new leg down. Brazil’s 2024/25 production seems to be getting off to a strong start, but there are concerns that hot and dry weather earlier this year will lower cane yields as the season progresses. The India Sugar and Bio-energy Manufacturers Association said Indian sugar millers are seeking government permission to export 2 million tonnes of sugar this year. The group had earlier asked permission to export 1 million tonnes. The government has been reluctant to allow sugar exports, as it seeks to keep domestic prices low, especially ahead of the national election. It has also stated that it would continue to support the ethanol industry. The chances for the export ban to be relaxed could increase after the election is completed in June.


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