US Cotton Crop Well Positioned

COTTON

July cotton collapsed overnight and fell to its lowest level since last June. With soil moisture conditions much improved over the past couple of years, the US crop looks well positioned at the start of the growing season. Traders are also expecting the US to see heavy export competition from Brazil and Australia. The weekly USDA Crop Progress report released yesterday afternoon showed 15% of the US cotton crop was planted as of Sunday, up from 11% last week and 14% a year ago and as a five-year average. The forecast this week calls for moderate to heavy rainfall in the Delta with lighter amounts in west Texas, which could slow planting progress but also help newly planted cotton get off to a good start. Cotlook said last week that global cotton production in 2024/25 is expected to exceed consumption by 429,000 tonnes, up from an estimate of 95,000 in March. The production outlook was raised by 334,000 tonnes, mostly due to bigger production in Brazil and the US, and consumption was left unchanged.

COFFEE

Coffee prices continue to see coiling action, which has kept the market above last week’s lows but unable to sustain a recovery move. There have been repeated reports of Vietnamese farmers holding off on marketing their remaining supply from this season’s crop. However, Vietnam’s General Statistics office said yesterday that April exports were 3.9% above year-ago and that the January-April total was 5.4% higher than the same period last year. Indonesia exported 3,093.4 tonnes of robusta beans from the island of Sumatra in March, a 60% decline from the same period last year. Coffee farmers in Vietnam have sharply increased the use of irrigation in the main producing regions because of dryness, but they are running low on water. An intense heatwave is spreading through Southeast Asia, with maximum temperatures in northern and central Vietnam ranging from 40.2-44 degrees C (104-111 F), and the heat is not expected to subside until Wednesday. Brazil’s main Arabica growing areas had little to no rainfall last week, which may have a negative impact on their 2024/25 crop.

COCOA

July cocoa extended yesterday’s selloff overnight to fall to its lowest level since March 21, but it has made a big bounce off its lows and is closing in on unchanged from yesterday. Yesterday’s decline in NY futures was the largest single-day loss ever. Even with the supply/demand outlook remaining bullish, it took a relatively small amount of bearish news to turn Monday’s selloff into a rout. The shift towards wetter weather over West African growing areas over the past few weeks has improved the outlook for this season’s mid-crop production, even with last week’s total rainfall still being below normal in some regions. Quarterly earnings from Mondelez today and Hershey on Friday will provide more clarity on the impact that high prices have had on North American demand.

SUGAR

Sugar prices have been unable to break out of their late-April consolidation zone despite three sessions in a row with wide-sweeping action. The market has lifted clear of last week’s 13-month low following bearish Brazilian supply news, and that can help it finish the month on an upbeat note. Brazil’s Center-South mills saw a 10% shift in sugar’s share of crushing from the second half of March to the first half of April which strengthens the case for Conab’s forecast of record Brazilian production this year. Drier than normal conditions have had the trade expecting Brazil’s sugar output to come up short of last year’s record, but the increased emphasis on crushing cane for sugar over ethanol appears to be offsetting those concerns. European farmers planted slightly more sugar beets this year, encouraged by high sugar prices, but the harvest is uncertain after heavy rain delayed planting and mild weather raised the risk of a devastating disease in some places.

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