ADMIS News
COTTON
The cotton market could be headed for more consolidation as traders will be reluctant to push the market too much lower ahead of spring planting. The market’s focus could soon shift to the upcoming USDA Prospective Plantings report due out next Thursday, March 28. The USDA Outlook Forum in February forecast 2024/25 plantings at 11.0 million acres versus 10.23 million last year and 13.75 million the year before that. 11.0 million planted would be the second smallest since 2016/17. Last year’s harvested acreage was only 7.06 million, which was the lowest on record going back to 1960/61. Soil moisture conditions are much better than a year ago, which improves the chances for heavier plantings, and the market has done a pretty good job of bidding for acres this winter.
COCOA
Cocoa prices continue to reach unprecedented heights, as tight supply and forecast for large global production deficits have sparked panic buying. May cocoa gapped higher this morning and traded to another new all-time high, just short of $8500. Reports that West African farmers are starting to hoard cocoa beans has compounded an already tight supply situation in the region. Several processing plants in Ivory Coast and Ghana have had to shut down operations due to a lack of beans to crush. As of March 10, Ivory Coast cocoa deliveries were running 30% behind year ago. There are concerns that producers may be unable to fulfill some contracts.
COFFEE
May coffee is higher this morning but trading inside Friday’s range. Dry weather this year in Brazil’s key coffee growing region has provided underlying support for the coffee market, but this has been limited by forecasts for a large global surplus next year and a steady increase in ICE exchange stocks. Last week Rabobank forecast a global coffee surplus of 4.5 million bags for 2024/25, up from a surplus of 500,000 bags for 2023/24. On Friday, Marex Group called for a 6.6 million-bag surplus. Thera are also concerns about European imports being hit by shipping disruptions in the Red Sea, which could lead to a buildup of supply at origin. Last week there were also reports of Brazilian farmers getting a slow start in pricing their upcoming crop. Safras & Mercado said farmers had only priced 14% of the new Arabica crop as of March 12 versus 25% historically. In contrast, robusta supplies in top producer Vietnam remain very tight, and traders are said to be anticipating a downward revision of 2-3% in their 2023/24 crop forecast. ICE exchange stocks increased by 20,853 bags on Friday to 488,678, up from 467,825 on Thursday and the highest in at least six months.
SUGAR
May sugar pushed above the 50-day moving average this morning, which keeps the uptrend off the March low intact. Analysts have been lowering their forecasts for Brazil’s upcoming (2024/25) sugar production due to dry conditions since late last year. Brazil’s Center-South production for the current (2023/24) crop is about 26% ahead of last year. New-crop harvest is expected to begin late this month or early next. Fitch Solutions said on Friday that prices are being supported by reports of decreased sugar cane plantings in key Indian states as well as the anticipated reduction in output from Brazil. Reports of improving Brazilian demand for ethanol could also draw cane crushing away from sugar production. Crude oil prices reaching their highest level in four months last week is supportive.
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