West Africa Rains Expected

COCOA

May Cocoa was higher overnight but inside yesterday’s range down action. The May contract managed to hold its January lows yesterday, but March fell to its lowest level since December 27. The March-May switch has collapsed over the past two months, and March is now trading at a discount to May. Both contracts have also broken below the 50-day moving average for the first time since October this week. World Weather Service says west-central Africa will experience increasing rainfall next week, which may stimulate some flowering of coffee and cocoa trees. Ivory Coast and southern Ghana will be wettest first. ICE warehouse stocks fell 6,740 bags yesterday to 1.398 million, their lowest since January 31. Stocks have declined 12,482 bags over the past three sessions after increasing 146,900 over the previous five. Yesterday it was reported that Ghanian arrivals had reached 542,233 metric tons by the end of January, which would seem to put puts the nation within reach of its official 2024/25 output target of 650,000. Ghana’s 2022/24 production was 480,000 tons.

SUGAR

March Sugar reached its highest level in almost two months yesterday and pushed through the 200-day moving average for the first time since December 17, but it failed to close back above that line, which could be a key resistance level today. At yesterday’s high, the market had rallied 2.62 cents (15%) from January’s 22-month lows. More heavy rains were seen in northern Queensland, Australia over the last 24 hours. This follows reports this week that flooding in the region may have destroyed as much as 1 million metric tons of their cane crop, which would reduce Australia’s annual sugar output by some 130,000 tons. Recent Unica report have shown a sharp, seasonal drop in Brazilian production, which may be tightening near term supplies. There was also a greater focus on ethanol production. Seasonal rains in Brazil have slowed harvest, but they have also improved prospects for the upcoming season. Brazilian analysis firm Green Pool said this week that they expect the global sugar balance to show a (modest) surplus of 2.7 million metric tons in 2025/26, up from a deficit of 3.7 million in 2024/25 due to higher production from Brazil, India, and Thailand.

COTTON

March Cotton was higher overnight, having found mild support yesterday. The dollar is set to close well off its highs from Monday, which puts US exporters in a better position. March Cotton has avoided testing Monday’s contract low that came in reaction to the US tariff announcement that raised concerns about possible retaliation from China. When China focused on US energy exports instead of ag products in their initial reaction, it may have brought a relief to US cotton exporters. Yesterday’s weekly export sales report showed US cotton sales for the week ending January 30 at 188,909 bales for the 2024/25 (current) marketing year and 14,873 for 2025/26 for a total of 203,782. This was down from 318,642 the previous week and the lowest since January 2. However, shipments totaled 221,058 bales, up from 153,512 the previous week. Shipments have been above 200,000 bales in three of the past four weeks, and the four-week moving average of 205,500 is the strongest since August. Cumulative sales for 2024/25 have reached 86% of the USDA forecast versus a five-year average of 89% for this point in the season. This discrepancy may not be enough to move the USDA to lowered its export forecast in Tuesday’s supply/demand report. Dry conditions in Eastern Australia may be stressing unirrigated crops  there, and too much rain in Brazil may be slowing harvest and the planting of Safrinha cotton. At some point the market may need to bid for acres.

COFFEE

March Coffee was higher overnight as it approached yesterday’s high. Yesterday marked the 11^th straight session that coffee traded to new all-time highs. Colombia produced around 1.63 million bags of washed arabica coffee in January, up from 959,000 for the same period last year, a 41% increase. Exports in January totaled 1.15 million bags, up from 937,000  last year. Their total production for 2024 was 14 million bags, with exports of 12.3 million. World Weather Service said rain continued to diminish in key coffee production areas this week and that this trend will remain in place for a while. Sporadic shower and thunderstorm activity is expected over the next 10 days but not enough to counter evaporation. Some coffee areas will experience net drying for a while, and temperatures will trend warmer. Traders quoted by Reuters yesterday said farmers in Vietnam are “keen to sell” now that the New Year Holidays are over. ICE certified arabica stocks increased by 6,748 bags yesterday to 854,553 after falling to their lowest since October 29 on Wednesday. There were 8,531 bags that passed grading and 3,197 that failed, all from Brazil. With the market having rallied another 26.35 cents (7%) through Tuesday, this afternoon’s Commitment of Traders Report could show the net long making a new all-time high. And with the market gaining another 27.90 to yesterday’s high, the current net long could be even larger yet. The peak net long for cocoa was almost 79,541, which suggests there could be further buying capacity for the funds given that they have backed off from cocoa.

The drier trend in Brazil may support  more spec buying. However most of the crop concerns stem from the hot and dry conditions last year that set the crop up for poor cherry development and lower production.

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