Robusta Rally Lends Support
July coffee broke out of a two-day consolidation overnight and traded back up inside Tuesday’s wide range. A bit of optimism regarding a US debt limit deal has contributed to a risk-on mood. The Brazilian government agency Conab reduced its forecast for that nation’s 2023/24 overall coffee production by 200,000 bags to 54.7 million. They increased the Arabica estimate by 500,000 bags to 37.9 million, due in part to more favorable growing conditions in the top-producing state of Minas Gerais, but they cut the Robusta forecast by 700,000 bags due to below average rainfall early in the season. Robusta prices remain close to 12-year highs, which is also due to very tight Vietnamese supplies, and that strength has carried over to New York (Arabica) futures this week. A dry weather forecast for Brazil’s coffee areas over the next 6-10 days should help advance the harvest.
July cocoa recovered off its lows and extended Thursday’s downside move overnight, but it quickly bounced off those levels and was higher on the day this morning. A generally positive global risk attitude helped turn the market around. The market has seen coiling action over the past 1-1/2 weeks after trading to new contract highs and putting in a key reversal on May 12. There are reports that West Africa’s early harvested mid-crop cocoa beans are coming in smaller than normal, and this is raising concern that they may not be high enough quality for most export customers. Ivory Coast’s full-season crop is running behind last season’s pace, but the latest weekly port arrivals total was large, which suggests that harvesting, drying, and transporting of the mid-crop are reaching full speed. Sharp selloffs in the British Pound and Eurocurrency yesterday and overnight could put limit gains in cocoa on ideas it could negatively impact European demand.
July cotton trade was choppy overnight but was holding inside the upper part of Wednesday’s breakout range. The market sold off a bit in the wake of the USDA export sales report on Thursday but worked higher from there as the session progressed. The report showed US cotton export sales for the week ending May 11 at 132,443 tonnes for the 2022/23 marketing year and 28,077 for 2023/24 for a total of 160,520. This was down from 259,577 the previous week and was the first time that sales were below 200,000 bales since April 13. Cumulative sales for 2022/23 have reached 12.632 million bales, down from 14.862 million a year ago and the lowest for this point in the marketing year since 2015/16. Sales have reached 106% of the USDA forecast for the marketing year versus a five-year average of 107% for this point in the season.
July sugar was higher overnight, recovering most of Thursday’s losses. Strength in energy and a generally positive risk vibe were lending some support. The recovery in energy prices is welcome after the steep selloff earlier in the month. The Brazilian currency is up slightly this morning, which reduces pressure on producers to sell their product. The Petrobras gasoline pricing policy change this week could encourage Center-South mills to keep sugar’s share of this season’s crushing ahead of last season’s levels. Dry weather over Brazil’s Center-South cane-growing regions will help speed up harvesting and crushing operations. This has weighed on prices this week, and these conditions are expected to continue over the next week or two.
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