Traders Eye USDA Cotton Outlook

COTTON

March Cotton fell sharply yesterday but managed to barely hold above the contract low from October 14. There has been no indication yet when the USDA’s weekly Export Sales or Crop Progress reports will resume. For the WASDE (supply/demand) report tomorrow, traders are looking for modest increases in US and world production and ending stocks. A Bloomberg poll has an average trade expectation for US 2025/26 cotton production at 13.52 million bales (range 13.00-14.30 million), up from 13.22 million in the September update. Exports are expected at 12.08 million versus 12.00 million in September, and ending stocks are expected at 3.76 million (range 3.30-4.40) versus 3.60 million previously. World 2025/26 production is expected to come in at 117.91 million bales (range 117.00-119.00 million) versus 117.68 million in September, world consumption at 118.12 million versus 118.83 million in September, and world ending stocks at 73.64 million versus 73.14 million in September.

COFFEE

US Treasury Secretary Bessent said yesterday that Americans would see “substantial announcements” in coming days aimed at lowering the prices of products like coffee, and this has the trade primed for a reduction in tariffs. Besides the 50% tariff on Brazilian imports, there are smaller but still substantial tariffs on imports from Colombia and Vietnam. The Administration does not necessarily need a trade agreement with these countries to carve out an exception for certain goods, like coffee particularly agricultural products that cannot be grown in the US. Last week’s election results give the Administration motivation to lower prices any way they can. US grocery store prices for roast and ground coffee in September were up 41% from a year ago.  On the other hand, the lack of any announcement suggests the Admin is still trying to make a trade deal with Brazil. The market is also waiting for a Supreme Court ruling on the legality of the tariffs, and Brazil may be hesitant to sign until that announcement comes through.

SUGAR

March Sugar extended yesterday’s rally overnight and traded to its highest level since October 27. The market had gotten oversold on the oversupply theme, and some bullish items have emerged recently to counter the bearish scenario that has dominated the market in recent weeks. This week, Datagro lowered its forecast for the 2025/26 global surplus to 1 million metric tons from a previous forecast of 2.8 million. They expect Brazil’s center-south production to fall as we move towards the end of the year, due to mills ending operations early and changes in strategy to use less cane to make sugar and more to produce ethanol. There were also reports that China and Indonesia have increased buying to take advantage of lower prices, and the Egyptian Sugar and Integrated Industries Company (ESIIC) has set a tender to buy 50,000 metric tons of raw sugar cane with the offer deadline set for Saturday.  For the upcoming UNICA report, a survey of analysts conducted by S&P Global calls for Brazil center-south cane crush for the second half of October to come in at 29.42 million metric tons, which would be up from 27.21 million for the same period last year and down from 34.04 million in the first half of the month. Sugar production is expected to come in at 1.915 million tons versus 1.776 million last year and 2.484 million in the first half. This would put cumulative production as of November 1 at 37.931 million tons, up 1.2% from a year ago versus +0.9% as of October 15. Ethanol production is expected at 1.845 billion liters versus 1.665 billion for the same period last year and 2.013 billion in the first half. This includes corn as well as cane-based ethanol. Sugar’s share of ethanol production is expected to come in at 45.03% versus 45.91% a year ago. For the first half of October, sugar’s share fell below 50% for the first time since April. Low sugar prices may be pulling crushers back to ethanol.

COCOA

March Cocoa fell to a new low for the move yesterday and to its lowest level in a year, and the nearby price fell to its lowest since February 2024. The market has turned negative on prices in the wake of an improvement in Ivory Coast port arrivals this week and generally benign weather, as well ideas that high cocoa prices are hurting demand, as evidenced by a slowdown in quarterly grinds and lower sales numbers from chocolate candy companies. World Weather Inc. says West Africa seasonal rains are slowly winding down from north to south, although precipitation will occur periodically during much of the coming week to ten days. The weather pattern will not change much during the next week and is viewed as normal for this time of year.  The dry season is approaching. ICE stocks fell 2,859 bags yesterday to 1.784 million, their lowest since March 24.

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