May Cocoa Holds Gains

COCOA

May cocoa traded to another new contract high on Thursday, and it is holding those gains this morning, as there seems to be no letup in commercial buying. West African supplies are tight after a dismal crop last fall, and there is plenty of anxiety regarding the upcoming mid-crop after the extreme heat and dry weather of the past few months. So far, the market has discounted any reports of rain in West Africa, as it is too early to tell if they are doing any good. The dry season normally ends in late March or April. The world’s two largest producers, Ivory Coast and Ghana, have pulled back from forward sales, leaving commercial buyers looking to Ecuador and southeast Asia.

COFFEE

Uncertainty over the upcoming Brazilian crop and tight robusta supplies provide support, but ICE exchange Arabica stocks have reached their highest level since last June, and industry reports have expectations for expanding supply in the coming year. May coffee continues to consolidate inside a range defined by the December high at 200.75 and the January low at 173.10. Brazil’s Cooxupe, the world’s largest coffee cooperative and Brazil’s top exporter, is expecting a similar harvest to last year or slightly bigger. This is an “on-year” for their crop, and the expectation of a “similar” harvest suggests reduced expectations for this year because of the dry weather Brazil has experienced over the past several months, but keep in mind that last year’s harvest was stronger than what would be expected for an off year. The harvest is expected to begin within a month. The chairman of Italian coffee roaster Illy said they expected global coffee prices to fall in the second half of 2024 on a larger surplus of beans, citing no issues on the production side.

COTTON

A generally positive export sales report only lent minor support to the cotton market yesterday, which suggests traders are more concerned about competition from Brazil and Australia. May cotton was slightly lower overnight and fell to its lowest level since February 21. The export sales report showed US cotton sales for the week ending March 14 at 92,620 bales for the 2023/24 (current) marketing year and 40,642 for 2024/25 for a total of 133,082. This was down from 198,573 the previous week but was the second largest since February 15. Shipments totaled 397,297 bales, which was the highest so far for the marketing year. Cumulative sales for 2023/24 have reached 93% of the USDA forecast for the marketing year versus a five-year average of 97% for this point in the season. The weekly Drought Monitor showed approximately 7% of US cotton area was under drought as of March 19, down from 9% the previous week and 46% a year ago. This should make cotton planting more attractive this year and could get the crop off to a much better start.

SUGAR

The 50-day moving average in May sugar at 22.24 could be a key bull/bear line today. The market tested that line over the course of seven sessions between March 11 and March 19, and when it failed to close above it on a test on Monday, it sold off sharply. Concerns about the upcoming Brazilian cane crop continue to lend support, despite recent rains. Private analysts have been increasing their global surplus forecasts recently, off better than expected late-season output in India and Thailand. StoneX has raised its forecast for the global supply surplus for 2023/24 to 3.88 million tonnes, up from a forecast of 3.4 million in February.

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