Strong $ Pressures Old-Crop Cotton

COTTON

Old-crop cotton is being pressured by demand concerns, and the new crop is supported by lower-than-expected plantings and typical uncertainty ahead of the growing season. The USDA recently raised its forecast for Australia’s cotton production for 2023/24 by 200,000 bales to 5 million, and it forecast 2024/25 production at 5.5 million. Most of Australia’s cotton is harvested in April and May, which could limit US export prospects. A stronger dollar, with the nearby Dollar Index close to taking out its February high, makes US cotton less competitive on the world market. Higher crude oil prices are supportive, but the jump in US long term rates this week is not.

COCOA

The cocoa market is seeing choppy, two-sided action as it consolidates around the $10,000 per tonne level. The beginning of the West African 2023/24 mid-crop harvest and Ivory Coast’s move to increase its farmgate price may help loosen near-term supplies and put some pressure on prices. However, the harvest is expected to down sharply from last year due to poor weather this spring, and this comes on top of a poor main crop and expectations for a third straight global supply deficit. There is rainfall in the forecast for West African growing areas on most days through late next week, which could benefit later-harvested beans. Forecaster Maxar said this week that while some rain reached cocoa areas in West Africa over the weekend, more will be needed to ease dryness facing crops. Ivory Coast confirmed yesterday that it had raised its fixed farmgate price by 50% for the April-September mid-crop. This may encourage farmer selling and help ease the global shortage, but the success of the move remains to be seen.

COFFEE

May NY (Arabica) coffee extended higher overnight, up through the December 19 high, and May London robusta coffee traded to new contract highs overnight and the highest since 1994 on the nearby chart. Reports that heavier than normal rainfall last week may have damaged coffee trees in Brazil’s major arabica growing regions have supported the market this week. Earlier in the week, Somar Meteorologia reported that Minas Gerais received 75.4 mm of rain last week, 335% of normal. ICAFE reports that Costa Rican coffee exports totaled 94,379 bags in March, down 39,200 from the same month last year. Exports are down 14% for the first six months of the 2023/24 harvest and are the lowest in at least five years. The Costa Rican currency, the colon, has gained some 13% on the dollar, which lowers the relative value of exported coffee and lowers the incentive for growers to export coffee. The rally in robusta beans has been driven by a sharp decline in Vietnamese production this year, and this has lent support to the Arabica market as well.

SUGAR

May sugar fell under pressure yesterday after the Indian Sugar and Bio-energy Manufacturers Association requested that the government allow exports of up to 1 million tonnes of sugar for the current marketing year. Late last year, the government halted exports on concerns of tight supply, but late season improvements in production have raised the possibility of lifting the ban. This group said this week that it is estimating Indian sugar production reached 30.2 million tonnes during the October-March period, up from 30.08 million a year earlier. They said India’s 2023/24 sugar output will likely reach 32 million tonnes, with domestic consumption seen at 28.5 million. There has been talk that the government may be more open to lifting the ban on sugar exports after the parliamentary elections in early June. Estimates for Thailand’s 2023/24 production have been revised higher due to large output during the first quarter. Drier weather in Brazil’s Center-South is expected to help cane harvest get off to a strong start, but conditions may turn wetter later in the week.

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