Demand For Cotton Remains A Concern

COCOA

The cocoa market continues to trade in a relatively narrow range, finding support from tight old crop supplies and being limited by the potential for relief from the upcoming main crop. The ICCO will update its forecast for 2023/24 production at the end of this month, but we will have to wait until next February to get their first forecast for 2024/25. We have been hearing mostly favorable reports from producer Ivory Coast growers despite the recent, seasonal, dry conditions. Reports are less consistent from Ghana, the world’s second largest producer, as reporters have expressed concerns about hot and dry conditions there and the struggle to overcome swollen shoot disease. World Weather Service says Ivory Coast, Ghana, and Nigeria should see an increase in rain in the latter part of this month, which could improve conditions, especially for Ghana. Ivory Coast harvest is expected to begin next month. The 2024/25 marketing year officially begins on October 1. Rain was noted in east-central Bahia, Brazil on Wednesday and early Thursday, which could benefit northern cocoa areas. If rains return to west Africa as expected, it could put new pressure on the cocoa market.

COFFEE

December Coffee was near unchanged overnight after a rally yesterday helped it close a gap from earlier this week. The market has been trading in a sideway pattern for the past couple of weeks, as dry conditions in Brazil and concerns about next year’s crop have been offset by an active harvest. A frost threat sparked a one-day rally on Monday, but the market quickly corrected when the frost did no real damage, and it has been in a back and forth mode since. The key production area of Minas Gerais is looking dry for the next couple of weeks. Large parts of the Central Highlands of Vietnam received light to moderate rain this week, and showers and thunderstorms are expected in the coffee production areas through the next week, which should be good for cherry development.  ICE arabica stocks increase 11,288 bags yesterday to 836,921, which is the highest since June 25. Nicaragua-origin stocks increased 6,490 bags, with Brazil up 3,148, Honduras up 1,100, and Peru up 550. The buildup could limit price gains.

COTTON

December Cotton is lower this morning and is approaching the contract low from last week. Global production is facing little or no weather threat, and demand remains a concern. The USDA supply/demand report showed a drop in 2024/25 US and world ending stocks from the July report, but they are still expected to be the highest in five years. Yesterday’s export sales report showed US cotton sales for the week ending August 8 at 110,946 bales for the 2024/25 (current) marketing year and 352 for 2025/26 for a total of 111,298. This marked an improvement over the net cancellations of 950,000 in last week’s report. Cumulative sales for 2024/25 are the lowest in eight years, and they have only reached 30% of the USDA forecast for the marketing year versus a five-year average of 49% for this point in the season. World Weather Service says Texas will remain dry in the southern harvest areas, which should expedite fieldwork. West Texas rainfall will be sporadic and light, leaving many dryland crop areas in need of rain. The Delta could see rain the next ten days to two weeks, except for the Tennessee River Basin, which will see less than usual precipitation.

SUGAR

October Sugar was higher overnight after failing to take out the August 5 low in its selloff this week. An as-expected UNICA Brazil production report earlier sparked that selloff, but the report did still show a decline in sugar production from last year, which is being attributed to the extremely dry conditions they growing regions have experienced since the start of the year. Cumulative production is still running ahead of a year ago, but this is expected to change as we move through the season. This is in contrast with India and Thailand, which have seen decent rain this season and are expected to see their production recover. India’s monsoon has been generally strong this year, but excessive moisture in central through some northern parts of India may be induce periods of flooding. No serious harm appears to have come to most crops so far.

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