Explore Special Offers & White Papers from AFS

Sharp Move Higher in Coffee


Tight near-term supplies and the prospect of El Nino disrupting next year’s output sparked a sharp move higher in coffee yesterday, leaving the market in position to test its contract highs from April. ICE exchange coffee stocks fell another 5,082 bags on Thursday and have now declined more than 262,000 bags (32%) from their 2022 year-end total. Robusta prices have soared, and this has lent support to the Arabica (Coffee C) futures. Trading in Robusta beans in Vietnam has ground to a halt, and farmers in Vietnam have reportedly sold all their crop. Vietnam’s exports in May were seen down 8.5% from April and down 5.1% from a year ago, according to the General Department of Vietnam Customs. January-May shipments were down 3.9% from 2022. The US Climate Prediction Center has declared that an El Nino weather event has officially begun. Such an event typically brings heavier than normal rainfall to Brazil’s major growing regions. This will likely be too late to impact their 2023/24 crop, which is already being harvested, but it could disrupt the flowering period for the 2024/25 crop and cause damage to trees.

coffee beans in cup


West African cocoa supply remains tight after two months of the midcrop harvest. Recent heavy rains in Ivory Coast have raised concerns about flooding and disease that could damage the crop. The rally to new contract highs in September cocoa yesterday set the stage for another leg higher in an uptrend that began last September. While anticipated for some time, the declaration by the US Climate Prediction Center that El Nino has officially begun drives home concerns for next year’s crop. El Nino can bring hot and dry conditions to West Africa and southeast Asia, negatively impacting cocoa production. This comes on top of two significant annual global production deficits in a row.


With El Nino comes increased chances of rain for Texas that could ease concerns about this year’s crop and limit upside potential for cotton unless actual conditions defy expectations. On the other hand, cotton demand news has improved recently. The export sales report on Thursday showed US cotton sales at 511,215 bales for the week ending June 1, up from 344,238 the previous week and the highest they have been since January 2022. Cumulative sales have reached 113% of the USDA forecast for the marketing year versus a five-year average of 110% for this point in the season. The weekly US drought monitor showed more improvement in West Texas last week and a substantial reduction in cotton areas under drought, down to 19% of the US Crop from 28% last week. Temperatures there are expected to run as much as 8 degrees (F) above normal over the next seven days with precipitation only 10-50% of normal and soil moisture levels are expected to drop. Trader expectations for the USDA supply/demand report on Friday are leaning bearish.


Sugar’s abrupt rally to a new monthly high on Thursday has put the market on course for a weekly reversal, but a strong harvest in Brazil and the arrival of the monsoon in India (one week late) could limit additional gains. The US Climate Prediction Center has declared that an El Nino weather event has officially begun. This is primarily a concern for India and Thailand, where it could bring drier than normal conditions that could hurt 2023/24 cane production and make it more difficult to do any replanting for 2024/25. El Nino could also bring heavier than normal rainfall to Brazil’s Center-South cane growing regions that could delay harvesting and crushing operations. Indications that European 2023/24 sugar production will fall below 2022/23 levels have also boosted prices this week. India’s monsoon finally reached the mainland on Thursday, and this may bring a sigh of relief to cane growers.


Interested in more futures markets?  Explore our Market Dashboards here.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

Latest News & Market Commentary

Explore Special Offers & White Papers from Archer Financial Services

Get Started

Contact Us Today