May Cotton Extends Rally Overnight

COTTON

May Cotton extended its recent rally overnight and is approaching a key resistance level at the 50-day moving average, which has held the market since late October. West and South Texas, northern Mexico and New Mexico either remain in a drought or are anomalously dry, and that coupled with lower plantings expected this year has helped lift cotton off its lows. Last week’s drought monitor showed 38% of US cotton production was in an area under drought, which was up from 28% the previous week. The latest update should be released this morning. The trade will also be looking at export sales following a strong report last week that showed US cotton sales for the week ending February 27 at 241,487 bales for the 2024/25 (current) marketing year and 105,634 for 2025/26 for a total of 347,121. Shipments at 334,035 were the strongest since March 28, 2024. The dollar is higher this morning, but it is only slightly above Tuesday’s 4 ½ month low, which helps US competitiveness on the global market, especially in the fact of tariff worries. (Brazil surpassed the US as the number-one cotton exporter for the first time in 100 years in 2022/23.) It was also impressive that the market managed to hold firm despite a slightly bearish USDA WASDE report this week.

COCOA

May Cocoa closed right at the 9-day moving average yesterday and is above that line this morning, which is a short term bullish development. The market has spent the past couple of weeks consolidating its losses after a selloff in February, which came with the arrival of some much needed rains in West Africa and an ICCO forecast for a 142,000-metric ton global surplus in 2024/25. World Weather Service expects daily rounds of showers and thunderstorms through the next week in Ivory Coast, Ghana, and Cameroon, where resulting rain will be light to moderate most often with some locally heavy rain on occasion.  However, with prices having fallen 36% since from their all-time high in December, the market may have absorbed the improved prospects for the mid-crop and will need further evidence of strong production. A private consultant increased its 2024/25 surplus forecast by 32,000 metric tons to 77,000 this week, which may be considered bullish against the ICCO’s estimate. Both estimates depend heavily on reduced grind. Cash market traders have noticed support for the market when it has dipped below $8,000/ton. ICE certified cocoa stocks increased 28,177 bags yesterday to 1.579 million, their highest since November 25. Stocks are up 145,000 bags in the last five sessions.

COFFEE

May Coffee is supported by tight supply and concerns about the upcoming Brazilian crop. World Weather Service is noting a gradual improvement in rain frequency this week but that it is still on the light side. They said there may be some temporary relief from dryness but not enough to alter their concerns. They added that a return of “normal” rainfall does not seem very likely.  Reuters reports that Vietnamese farmers are reluctant to sell as they hold out for higher prices. One trader estimated they have 30% to 40% of their stock left. On the other hand, demand remains a concern, with prices double what they were a year ago. Reuters also reports that North American coffee market participants are seeking clarity on how the trade war impacts their businesses. Companies have roasting, packaging and trading bases in the United States and Canada, and Mexico is a regular supplier of high-quality green coffee to both the countries. The postponement of the US tariffs of 25% on the majority of goods from Canada and Mexico does not seem to have included most forms of coffee traded, according to documentation seen by Reuters, because the product is mostly absent from the USMCA, the free trade agreement between the U.S., Mexico and Canada. ICE certified arabica stocks fell 9,407 bags yesterday to 793,625.

SUGAR

The UNICA report on center-south Brazilian sugar production for the second half of February will be released this morning. The last report showed first-half February production at 7,000 metric tons, down 73.8% from a year prior. Cumulative production for the April-March marketing year had reached 39.812 million tons, down 5.6% from last year at this time. Weather does not appear to be a threat to Brazil’s upcoming crop. World Weather Service says it looks to be “almost ideal” for sugarcane over the next ten days. Three agribusiness consultancies released fresh estimates for the 2025/26 harvest, with sugar production estimates ranging from 41.7 to 43.3 million tons, up from the roughly 40 million expected for 2023/24.

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