New Contract Highs, Again

COFFEE

March Coffee traded to another new contract (and all-time) high overnight, as concerns about the upcoming Brazilian crop prevailed. Estimates were already lowered late last year due to the drought and extreme heat earlier in the year, and the question is whether they be lowered again. Recent rainfall has eased some concerns, but they may have come too late. Previous reports had strong branch growth but poor cherry development. Safras & Mercado said last week that forward dales of the 2025/26 Brazilian crop were about 12% of the expected output versus 19% at this time last year, which may indicate a reluctance to sell on the growers’ part as well as buyers balking at all-time highs. World Weather Service reports that Indonesia had locally heavy rain that culminated in some flooding that will prevail for a while. Brazil’s coffee areas will see periodic showers and thunderstorms into next week.

Cup coffee beans wooden dark background

COTTON

March  Cotton was near unchanged overnight following a rally to its highest level since January 10 on Friday. The market drew support from a second straight week of strong US export sales. A weaker dollar also lent support, as that improves US export prospects. However, the cotton market could see some pressure today from weakness in US equity markets, which are being led by lower tech stocks in the wake of news that the Chinese AI software Deepseek has made significant breakthroughs that threaten the dominance of US AI and chip manufacturers. The export sales report on Friday showed US cotton sales for the week ending January 16 at 348,927 bales for the 2024/25 (current) marketing year and 79,816 for 2025/26 for a total of 428,743. This was up from a strong 317,568 bales the previous week and was the highest in year. Cumulative sales for 2024/25 have reached 8.417 million bales, down from 9.513 million at this time last year and below the five-year average of 11.020 million. Sales have reached 82% of the USDA forecast versus a five-year average of 85% for this point in the marketing year, but this is an improvement over recent trends. The largest buyer this week was Vietnam at 96,226 bales, followed by Indonesian at 75,935, Pakistan at 75,390, and Turkey at 71,246. China bought 7,271 bales. Pakistan has the most comments for 2024/25 at 1.849 million bales, followed by Vietnam at 1.647 million, Turkey at 1.086 million, and China at 689,000. The past two weeks may been a particularly strong, as Asian buyers may have been aggressive ahead of the Lunar New Year holidays, which is underway this week. World Weather Service says eastern Australia cotton areas have endured some hot and dry weather recently, which is stressing some unirrigated crops. Less heat is expected this week, but precipitation will continue limited with additional drying expected. Northern Argentina cotton areas will receive timely rainfall over the coming week, supporting a mostly good cotton development environment, and Brazil is rated favorably with much of the Bahia crop and areas in Mato Grosso do Sul planted. Fieldwork to the north in Mato Grosso and Goias is still behind, with much fieldwork left to be completed.

SUGAR

March Sugar extended last week’s rally overnight to trade to its highest level since January 10. At the overnight high, the market had rallied 1.87 (11%) from last Tuesday’s 22-month low. The market has recovered dramatically despite news last weekend that India would allow exports for the first time in over a year and that China had halted imports of Thai sugar syrup, which could put more sugar on the market. So far, it appears Indian mills are struggling to secure sales because their asking prices are too high. Last week’s winter storm that brought extreme cold to the cane crops in Louisiana and Florida could increase US import needs this year. Snow cover in Louisiana may have insulated the plants to some degree but not enough to prevent die-off. The next UNICA report on Brazilian Center-South production, covering the first half of January, is due out this week. The last report showed production for the second  half of December was down 73% from a year ago, with cumulative production for the 2024/25 (April-March) marketing year down 5.4% from 2023/24.

COCOA

March Cocoa is near unchanged this morning, trading inside last week’s range. Ivory Coast cocoa arrivals totaled 52,000 metric tons for the week ending Sunday, up from 34,000 the previous week but down from 53,000 a year ago and below the five-year average of 61,100 for this point in the season. Cumulative arrivals have reached 1.243 million tons versus 1.008 million a year ago and a five-year average of 1.313 million. The increase in arrivals from last week may offer a counter to the narrative that the dry conditions over the past couple of months will lead to a sharp drop in production. World Weather Service reports that thunderstorms parts of southern Ghana late last week have advanced into southern Ivory Coast, bringing a little relief from the hot and dry weather that had been prevailing in West Africa for weeks. Much more rain is still needed. There were more anecdotal comments last week about poor expectations for the Ivory Coast mid-crop. Official and industry representatives told Reuters that the mid-crop could be the worst in 15 years and could come in no higher than 300,000 metric tons versus  “yearly average” of 500,000. Growers are complaining of a lack of flowers and small pods on trees, with the situation being described as “unprecedented.” November-March is considered the dry season, and growers have been complaining about dry conditions in November and December. Seasonal rains can return in February. ICE cocoa certified stocks fell 6,824 bags yesterday to 1.263 million on Friday, the lowest since December 2003. Stocks are down 29,582 bags in the past three sessions.

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