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July Cotton Higher Overnight


July cotton was higher overnight after selling off for two straight days and falling to its lowest level since December 2022. The lack of a threat to US production this year after two years of drought in west Texas, coupled with abundant global supplies, has left the bulls with little to stand on. Exporters are expecting heavy competition from Brazil and Australia, and the trade may be sensitive to any harvest, production, or export news from those two countries. Traders will be looking to today’s US export sales report to see how business is holding up.

cotton fields


Sugar prices remain inside in their late April consolidation zone after two failed upside breakout moves in as many weeks. Expectations that Brazil’s Center-South sugar production will stay ahead of last season’s pace through at least mid-May have kept sugar prices close to 13-month lows. Sugar saw a larger share of Center-South crushing during the first half of April than it did last year, as sugar prices have been high enough to entice mills to crush for sugar. A sharp break in crude oil yesterday may have also weighed on sugar prices, as that could weaken Brazilian ethanol demand. The large delivery for the May ICE contract was considered negative as well, but strong stoppers by processors may have neutralized that effect, and the market did not see the selloff that some traders had expected.


July NY coffee extended its selloff overnight to fall to its lowest level since April 10, and July London robusta saw an even bigger decline, also to its lowest since April 10. Hot and dry weather in Vietnam has been a key factor in the rally this spring, but that story could only take the market so far. Starbucks saw a 6% year-over-year decline in same-store sales in the first quarter, and they reduced their guidance for the upcoming quarter. ICE exchange arabica stocks increased by 7,618 bags yesterday to reach an 11-month high, and there are more than 80,000 bags pending review.


July cocoa gapped lower overnight and pushed to a new low for the move, but the market did not see the type of panic selling it saw earlier in the week. Industry sources told Reuters that Ivory Coast and Ghana do not have beans available to fulfill up to 500,000 tonnes that were pre-sold at about a quarter of current world prices. This may not be a surprise, but it does drive home the tight supply situation. Indications that commercial firms are delaying some of their purchases until next season have pressured the market and perhaps explain why the bounce this week was so short-lived. There is daily rainfall in the forecast for West African growing areas starting Sunday and going through the rest of next week, which should benefit midcrop production.


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