Sugar Oversold on Monsoon Theme

SUGAR

July Sugar is higher this morning after putting in what could prove to be a spike low yesterday. The market has been under consistent pressure for the past couple of weeks from improved expectations for cane crops in India and Thailand thanks to an early arrival of the annual monsoon, but it may have gotten temporarily oversold on that theme. The India monsoon has stalled this week but is expected to resume its advance next week. A modest rally in crude oil this week could lend some support to sugar, but Brazil’s state run oil firm Petrobas announced on Monday that it would cut gasoline prices by 5.6%, the first cut since October 2023, which would appear to undermine ethanol demand.

Close up sugar cubes and cane in wooden spoon on the table

COFFEE

NY Arabica and London Robust Coffee are technically oversold and vulnerable to short covering rallies. Both markets have been under pressure recently from the advancing robusta harvests in Brazil and Indonesia.  Brazil’s arabica crop harvest is running behind year ago levels, with the co-operative Cooxupe reporting yesterday farmers had harvested 10.1% of their expected crops for 2025 as of May 30 versus 13.6% a year prior. They expect to produce 6.1 million bags, which would be steady with 2024. Overall, this year’s arabica crop is expected to be down from 2024 due to it being an off year in the production cycle but also because of dry conditions during much of last year. Last month, Conab put Brazil’s production at 37 million bags, which was an improvement over a previous forecast of 34.7 million but still down from some 40 million a year ago. There is a chance of cooler weather in Brazil next week but no risk of crop damaging cold.

COCOA

July Cocoa was slightly lower overnight but inside yesterday’s range. The market is in another consolidation mode as it awaits an improvement in arrivals from the Ivory Coast mid-crop. After a drier than normal winter, rainfall amounts have improved in West Africa in recent week, which is expected to benefit production, eventually. Arrivals have been behind year ago levels for the past three weeks. Last week ICCO tightened its estimates for 2023/24 supply but made no changes to 2024/25. World weather service said West Africa cocoa areas should see a good mix of rain and sunshine during the next ten days, which will be good for crop development. Aside from some lighter than normal rainfall two weeks ago, conditions there have been generally favorable for about five or six weeks.

COTTON

The cotton market is still struggling to mount any sort of rally as it waits for an improvement in the export outlook. The Trump administration has asked trading partners to present their “best offers” regarding trade by today, and we will see if that produces any encouraging headlines. The European commission did say on Monday that it would push the US to eliminate or reduce the tariffs. US crop plantings are running slightly behind last year, and the first crop conditions report of the season on Monday showed 49% of the US crop was rated good/excellent versus 61% at this point last year. However, this was very close to the five-year average of 48.8%. World Weather Service said West Texas should see “welcome” shower and thunderstorm activity over the next 7-10 days but that dryland fields to the southwest will need more rain. The Delta is expected to see more rain in the next 10 days that will further saturate soils and put plantings further behind.

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