Too Much Rain?

COCOA

September Cocoa traded to its highest level in six days on the open this morning but has since retreated to lower on the day. The market got a boost yesterday from a disappointing arrivals report that had total Ivory Coast arrivals at only 18,000 tons last week versus 25,000 a year ago. Farmers in Ivory Coast told Reuters yesterday that they have had too much rain recently and that overcast skies have prevented them from drying pods properly, which could cause beans to become moldy. This could be first time that the problem of too much rain has been mentioned this year. The head of Ivory Coast’s cocoa regulator, the CCC, said official arrivals reached only 1.540 million metric tons by the end of May versus the exporters’ estimates of 1.624 million (from the weekly arrivals data). He said that some trucks with poor quality cocoa were turned back by exporters, but their beans were still included in the weekly records, which would account for the discrepancy. The poor quality may have to do more with the lack of rain this winter than the current wet conditions. The main crop, which starts in October, will depend on the survival rate of cocoa flowers and young pods that are starting to appear in the fields, and they will need ample rains mixed with sunshine.

SUGAR

October Sugar fell to its lowest level in more than two years yesterday but then it reversed higher in what could almost be described as a sweeping reversal. This all happened ahead of the UNICA report, which was bearish against expectations but apparently not bearish enough to stall the rally. The market is lower this morning, has traded in a wide range, and is approaching yesterday’s low. Perhaps the market had gotten oversold on India monsoon theme, which has revived this week and which has the potential to boost Indian production this year.

COTTON

December Cotton traded inside yesterday’s relatively narrow range overnight. The weekly Crop Progress report released after the close yesterday showed 48% of the US cotton crop was rated good/excellent as of June 15, down from 49% the previous week and 54% a year ago, but ahead of the five-year average of 47%. Texas, Georgia, and Arkansas deteriorated slightly last week, but Mississippi improved from very poor levels. Texas and Georgia are slightly ahead of average, but Arkansas and Mississippi are behind. The report also showed 85% of the crop was planted, up from 76% the previous week but behind five-year average for this date of 90%. Mississippi is about 24 days behind at 71% planted versus a five-year average of 96%, and it is unlikely to catch up given the forecast for more rainy weather over the next week to 10 days.

COFFEE

The Brazilian coffee harvest appears to be advancing at a normal pace, with the more-advanced robusta harvest putting pressure on London prices, and the advancing arabica harvest having the potential to pressure cash arabica prices in the weeks ahead. However, the Brazilian real has reached its highest level in a year, which lowers the incentive for growers and roasters to offer beans for export and may encourage them to hold out for higher prices. Safras & Mercado said on Friday that Brazil’s coffee harvest had reached 35% complete as of June 11, up, down from 37% a year ago but above the five-year average of 33%. Sales of the expected output were in line with last year at 22% but below the five-year average of 31%. World Weather Service expects mild weather for the coffee growing regions, with no threat of crop damaging cold at this time.

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