Cotton Higher After Crude Oil Rally

COTTON

December Cotton was higher overnight in the wake of a sharp rally in crude oil following Israel’s attack on Iran. Cotton follows crude oil from time to time on ideas higher crude oil prices make man-made fibers more expensive. Another supportive factor was the USDA supply/demand report yesterday, which helped lift the market off its roughly two-month lows during the session. The report put US 2025/26 cotton production at 14.00 million bales, which was below expectations and down from 14.50 million in the May report. The USDA lowered harvested area and yields due to the heavy rains and delayed plantings in the US Delta. Ending stocks were lowered to 4.30 million bales versus 5.02 million expected and down from 5.20 million in May. This put the stocks/use ratio at 30.8% versus 36.6% in May,  33.3% last year, and a five-year average of 27.2%. This points to a tighter supply for 2025/26 than what was expected, but it is not historically tight. Yesterday’s export sales report produced another dismal result. China’s agricultural ministry yesterday lowered its forecast for 2024/25 cotton imports by 300,000 metric tons from its estimate in May.

COCOA

September Cocoa has been chopping around inside a range bound by roughly 8500-9500 for the past two weeks. Decent weather in West Africa has boosted concerns about the late mid-crop, but the dry conditions earlier this year have kept near term production concerns alive, and this is likely to remain so until Ivory Coast port arrivals pick up or there is some other indication of cash market pressure. World Weather Service expects showers and thunderstorms to continue across portions of west-central Africa during the next week, with all crop areas being impacted at one time or another. This has been the pattern for the past several weeks and is viewed as beneficial for pod growth. This pattern could start to weigh on market sentiment.

COFFEE

July NY Coffee gapped lower overnight and was approaching the June 3 low. London (robusta) futures fell through their June 3 lows to their lowest level since November 8. The London contract has been leading the NY futures lower on breaks as the robusta harvests in Brazil and Indonesia have advanced. Brazil’s arabica harvest is not as far along, and selling pressure could build as it advances. The Brazilian Institute of Geography and Statistics (IBGE) yesterday forecast the country’s coffee production for 2025 at 55.3 million bags, +0.5% from last month’s forecast. Production is still expected to be -3.1% from 2024, but they and several other groups have been revising their 2025 forecasts higher since January as weather conditions have improved. IBGE put the 2025 arabica harvest at 37.2 million bags, +0.6% from their previous estimate and -7% from 2024. Robusta production was forecast at 18.1 million bags, +0.4% from last month and +5.9% from 2024. World Weather Service says there is no threat of crop damage to coffee growing areas from the recent cooler conditions. ICE certified arabica stocks increased 9,937 bags yesterday to 837,524, the highest since June 4.

SUGAR

October Sugar gapped higher overnight, likely a knee-jerk reaction to a rally in crude oil off ideas that higher energy prices will make ethanol production from cane more attractive. This follows a move in sugar yesterday to its lowest level since January. The market is facing the likelihood of increased production in Asia this year based on expectations for good monsoon rainfall. The UNICA report on Brazil Center-South sugar production for the second half of May is scheduled to be released on Monday. For the report, an S&P Global survey of analysts showed an average expectation calling for sugarcane crushing in to be +1.2% from the same period last year at 45.91 million tons and for sugar production to be +4.7% to 2.84 million tons. This would put cumulative production -13.% from a year ago, which would be a considerable improvement over the -23% as of the first half. China’s agricultural ministry has increased its forecast for 2024/25 sugar production by 10,000 metric tons to 11.16 million. The USDA supply/demand report lowered the forecast for US 2025/26 sugar production to 9.254 million short tons from 9.285 million in the May update.

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