New Contract High for July NY Coffee

COFFEE

July NY coffee traded to another new contract high overnight, and the London contract approached its contract high from April 4. Global robusta supplies are tight, and the market is waiting for the Brazilian harvest to bring some relief. Low rainfall in Brazil’s Minas Gerais region last week has reignited concerns about the upcoming crops in Brazil. The Mercantile Exchange of Vietnam is expressing concern that if the lack of rainfall and water for irrigation continue, their nation’s 2024/25 coffee output in 2024/25 could decrease sharply from 2023/24, which itself is expected to be down 20% from 2022/23. In 2022/23 Vietnam was the world’s largest robusta producer and the second largest coffee producer overall, representing 18% of global production. ICE exchange coffee stocks increased by 10,630 bags yesterday to reach their highest level since last May. The Brazilian real collapsed yesterday after the US dollar spiked in the wake of a hot CPI number. The lower real encourages Brazilian export selling.

COCOA

July cocoa traded to a new contract high for the second straight session overnight, and May cocoa reached another new all-time high. Reports that Ghana is in talks with traders to postpone the delivery of 150,000-250,000 tonnes of cocoa until next season is another reminder of the tight supply situation in west Africa. This follows a similar move by Ivory Coast, and it puts more pressure on the mid-crop, which is just beginning to be harvested and is not looking very promising. Stronger than expected revenues for Swiss chocolate marker Barry Callebaut for September-February suggests demand has held up surprisingly well against higher prices. First quarter grinding data for Europe and North America are due to be released on April 18, and the trade is anticipating a decline from last year due to the shortage of beans.

COTTON

July cotton may find support at the 200-day moving average if it can weather a couple of USDA reports today. The sharp rally in the dollar in the wake of a hotter than expected CPI number lowers US export prospects. They are already down because of tight US supply and expected competition from newly harvested crops in Brazil and Australia. China’s agriculture ministry raised its forecast for cotton imports in the 2023/24 crop year to 2.3 million tonnes, in a report released today. This was up from 2 million in the March report, and it could boost US export prospects. China has been the number-one buyer of US cotton this year. Regardless, the trade may not be expecting too much from this morning’s weekly export sales report. For the supply/demand report today, a Bloomberg survey shows an average trade expectation for US 2023/24 ending stocks of 2.56 million bales, which would be up from 2.50 million in the March update but down from 4.25 million in 2022/23. The trade may also focus on Brazilian and Australian production numbers.

SUGAR

India is expected to see a normal monsoon this year with the passing of El Nino and the arrival of La Nina this summer, which would help boost the cane crop, among others. Private forecaster Skymet said they are looking for the monsoon to be around 102% of the long-term average. Recent improvements in production forecasts have prompted speculation that they could lift the ban, but the chances of that happening are limited by the possibility that the government would favor an expansion of ethanol production. The president of Brazilian agriculture consultancy Datagro said he expects overall yields in Center-South Brazil to be about 78.5 tonnes/hectare in 2024/25, down from 88.3 in 2023/24, despite improving rainfall last month. The collapse in the Brazilian real yesterday is considered bearish for sugar because it encourages export sales. The Unica supply report for the second half of March is due to be released on Friday. The price trend is down, but uncertainty about Brazil’s new crop provides support.

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