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Overnight Bounce in Sugar


July sugar was higher overnight after falling to its lowest level since March 2023 yesterday in the wake of some bearish supply news from Brazil’s government agency Conab. The market awaits the UNICA report on Brazilian production for the first half of April that is due out today. Yesterday’s Conab reports put the nation’s 2024/25 sugarcane crop (April/March) at 685.86 million tonnes, down 3.8% from the record crop of 2023/24. This was a smaller decline than was expected. Average yield is expected to be down 7.6%, but planted area has increased 4.1% to 8.67 million hectares. Ethanol production (sugar and corn-based) is expected to fall 4% to 34.18 billion liters. Sugar-based ethanol production is expected to fall 8%, as mills allocate more cane to sugar. Corn-based ethanol production is expected to increase by 16%. An outside day lower in the Brazilian real yesterday could set the currency up for a resumption of its downtrend, which could put additional pressure on sugar prices.


July NY coffee was lower overnight, and it could be vulnerable to a resumption of the recent downtrend if it takes out Wednesday’s low. Vietnam is expected to have drier than normal weather over the next few weeks, and growers are concerned that water shortages could limit irrigation of the upcoming crops. Vietnam cash market premiums to July London robusta futures have reached a record $1000 per tonne. July London coffee was sharply lower overnight after just barely posting a new contract high yesterday. ICE exchange arabica stocks increased another 8,820 bags yesterday. They are up 66,000 bags since the end of March and at their highest level since March 2023.


July cocoa is consolidating its latest move to all-time highs this month, and there is talk the market has priced in the tight supply. Technical indicators suggest a loss of upside momentum. However, those looking for a top have been burned repeatedly over the past year, and there is no top indicated. The possibility that Ecuador could become the world’s second largest producer over the next couple of years may ease supply concerns over the long run, but that doesn’t solve the shortage near term. There are reports that Ivory Coast and Ghana combined have rolled over 400,000 tonnes of cocoa to next season due to the severe shortage of near-term supply. West African growing areas have rainfall in the forecast on most days starting Sunday and lasting through the end of next week. The increased rainfall during the past few weeks should eventually benefit their late mid-crop and next season’s main crop cocoa production.


July cotton fell to the bottom of a trading range that lasted from November to mid-January last week and has managed to hold that level since. At its low, it was down 23.16 from the high in February, a 23% decline, leaving it in an oversold condition. The weekly US drought monitor showed approximately 9% of US cotton production was in an area experiencing drought as of April 23, unchanged from the previous week. This is a substantial improvement from 39% a year ago and 55% the year before that, which suggests that the crop could start off in good shape. However, sellers may be reluctant to push the market much lower this early in the season. US cotton export sales for the week ending April 18 came in at 177,077 bales for the 2023/24 (current) marketing year and 65,735 for 2024/25 for a total of 242,812. This was up from 226,189 the previous week and was the highest since February 1. This may have provided some encouragement for the bulls yesterday, but not enough to spark a recovery move. Sales have reached 98% of the USDA forecast for the marketing year versus a five-year average of 102% for this point in the season.


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