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Trade Expects Bearish Unica Report


The trade is awaiting the Unica Brazil sugar supply report for the second half of April, which is due to be released any day. The report for the first half showed Center-South sugar production was 31% above a year ago, and the trade is apparently looking for the second half to be 50% higher. Dry conditions have gotten the harvest off to a strong start, but they could bring lower yield as the season progresses. Crude oil prices were lower for the second straight session overnight and they were back in the vicinity of the two-month low from May 6. Lower energy prices can pressure sugar on ideas they reduce the attractiveness for mills to divert cane processing to ethanol.


July coffee has tested 100-day moving average support twice over the past six sessions and managed to bounce off that line both times. The market survived the news from Cecafe yesterday that Brazilian green coffee exports in April were 61% higher than a year ago, with arabica exports up 40% and robusta export five times higher than last year. Drier than normal weather has helped move the harvest along, but there are concerns that this could eventually reduce the size of the crop. Less than 10% of this year’s harvest has been completed so far. ICE exchange arabica stocks increased another 13,971 bags yesterday. They have nearly tripled since the end of last year.


July cocoa has a quasi-double-bottom at 6990 and 7025, and the fact that these levels are this/close to the 50% retracement of the move from the contract low to the contract high suggests the market may have reached a near term low. A large global production deficit is still expected for 2023/24, and west Africa still needs rain to save their mid-crop production and set them up for a decent recovery in 2024/25. Ivory Coast growers expressed disappointment with the rain totals last week. A rally in the Euro to a five-week high yesterday puts European grinders in a position to be more assertive in bidding for cocoa. Demand expectations may have also received a boost from dovish Fed commentary. An Ivory Coast trade organization said their nation’s independent power producers have reduced their power supply by 20% and may keep it at low levels over the rest of the year. This could have a significant impact on cocoa grinding operations, which could result in cocoa beans that had been destined for processing being diverted to the export market.


A bearish weather outlook for the US has sent cotton prices to their lowest levels in six months. The Crop Progress report on Monday showed 33% of the US cotton crop was planted as of Sunday versus 31% a year ago, which is also the 10-year average. US soil moisture is much better than it has been for the past couple of years, with only 8% of US production in an area experiencing drought versus 38% a year ago and 56% two years ago. Last week’s USDA report put 2024/25 US cotton production at its highest level in four years and world production at an all-time high. The one positive out of that report was that world ending stocks were forecast to be the lowest in nine years. With prices down 28% since February, there does not appear to be much weather premium built into the market, but there does not appear to be much of a threat either. India is anticipating decent monsoon rainfall this year with the departure of El Nino expected in the next month or so.


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