Low Prices Draw Cash Buyers

SUGAR

October Sugar has seen a considerable bounce off last week’s 2 ½ year lows, as bargain hunting has emerged with the low prices and traders focusing on lower output for Brazil. The market is lower this morning but inside yesterday’s range. The threat of a 50% tariff on Brazilian exports may be just noise, as sugar imports into the US are already  highly regulated, and the biggest supplier to the US (outside domestic production) is Mexico. Dry conditions in southern India suggest that conditions there may not be as ideal had been expected when the monsoon arrived early. News this week Pakistan will import 500,000 tons of sugar to stabilize local prices and that the Philippines has approved overseas purchases of 424,000 tons indicate buying has emerged at low price levels. There are also ideas that Brazilian mills may start to favor ethanol production over sugar due to low sugar prices. There were also suggestions that frost damage to the crop has also been more widespread than initially thought. UNICA is expected to release its report on Brazilian Center-South sugar production for the second half of June in the coming days.

COTTON

The cotton market continues to chop around off a push-pull on US export status in the face of tariff uncertainty. For the monthly USDA Supply/Demand report tomorrow, a Bloomberg survey has an average trade expectation calling for US 2025/26 production to come in at 14.21 million bales, which would be up from 14.00 million in the June report but down from 14.50 million in May. Higher production in tomorrow’s report would reflect the increase in planted area in the June 30 acreage report. Expectations for tomorrow’s report range from 13.75 to 14.75 million bales. 2025/26 exports are expected to come in around 12.47 million bales (range 12.2-12.84) versus 12.50 in the June update, and ending stocks are expected around 4.43 million (range 4.10-4.72) versus 4.30 in June.  World production is expected at 117.24 million bales (range 116.75-118.00 million) versus 116.99 million in June, and ending stocks are expected at 76.87 million bales (76-78 million) versus 76.80 million in June. Cumulative US cotton weekly export sales for both new and old crop are near their lowest levels in a decade.

COFFEE

Outside reversal action higher overnight suggests that harvest pressure may have peaked. News this week that Colombia’s output has been damaged by heavy rains is the first bullish supply story in a while, and the Trump Administration’s threats of a 50% tariff on Brazilian exports into the US has Brazilian coffee exporters worried. Vietnam government data showed that nation exported 119,000 metric tons of coffee in June, up 53% from the same period a year ago. Cumulative exports since January have reached 943,000 tons, up 4.1% from the same period last year. Colombia’s National Coffee Federation said yesterday the nation’s washed arabica production totaled 909,000 bags June, down 22% from the same period a year ago. This is the third straight month that production was below the previous year’s levels. Heavy rains have damaged crops and cut into production. Earlier this week the International Coffee Organization reported that global robusta exports rose 20.1% in May, thanks to increased flows from Vietnam, Indonesia and Uganda. Dry weather Brazil has been conducive to the harvesting and drying of coffee, and no rain was reported in the last 18 hours. World Weather Service says rain over the next ten days will be limited to showers near the coast in Bahia, Espirito Santo and infrequently in Zona da Mata and away from the main arabica areas, with no risk of crop damaging cold. Colombia could still see regular rounds of showers and thunderstorms during the next week,  not giving the area much of a chance to dry out.

COCOA

Reports this week that 2025/26 West African production could fall 10% from 2024/25 counters the bearish weather outlook that has confronted the cocoa market over the past several weeks. As reported yesterday, cocoa pod counters and exporters interviewed by Reuters this week suggested that West African cocoa production could decline 10% in 2025/26 based on a higher than expected mortality rates for flowers and small pods (cherelles) in June. They are citing the unusually dry conditions this past winter, as apparently the recent rains did not arrive in time to provide much help. World Weather Service expects scattered to occasionally numerous showers and thunderstorms from Ivory Coast through Ghana and Benin to Nigeria and Cameroon for the next week. They say all production areas should be impacted at one time or another. The overnight maps showed little or no precipitation in the main cocoa growing regions of Ivory Coast and Ghana over the past 24 hours. Swiss chocolate maker Barry Callebaut cut its volume guidance for the third time this year on Thursday due to what it described as “unprecedented market conditions” in the cocoa bean market. Its nine-month results were in line with market expectations, and it expects its sales volume to fall by 7% in the year ending on August 31. Second quarter grind data for Europe, Asia, and North America is due to be released a week from today, and this will could provide more insight on how demand is being affected by  high prices.

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