Cotton Market Positive Reaction to US/China Tariff Pause

COTTON

July Cotton Is higher this morning in a positive reaction to the agreement between the US and China to a 90-day pause in the tariffs. The agreement says that the US will cut the extra it imposed on Chinese imports in April this year to 30% from 145% and Chinese duties on US imports will fall to 10% from 125%. Though this is not a final deal, the trade views it as a positive step. Equites and crude oil are sharply higher this morning, which lends secondary support to cotton, but the cotton market also benefits from the improved demand tone. The dollar is sharply higher, which undermines cotton,  but overall the trade news is supportive.  World Weather Service says west Texas planting prospects improved from to recent rain, although more rain is needed, especially in the dryland areas of the. This could help advance fieldwork in the coming week. However, warmer temperatures could begin depleting soil moisture. Field conditions in the Delta are a little too wet, and drying will be interrupted periodically by more rain during the next ten days. Southeastern is getting needed rain, which will improve planting and establishment from southeastern Alabama through Georgia to South Carolina. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 5,182 contracts of cotton for the week ending May 6, reducing their net short to 21,049.

Today’s USDA supply/demand report will be the first to include 2025/26 forecasts. A Bloomberg survey has an average trade expectation for US 2025/26 cotton production at 14.22 million bales (range 12.90-16.35), which would be down from 14.41 million for 2024/25 (based on lower plantings this year). Exports are expected to come in at 11.56 million (range 9.90-14.30) versus 10.9 million in 2024/25, and ending stocks are expected at 5.35 million (range 4.00-7.20 million) versus 5.00 million last year. World 2025/26 production is expected to come in at 118.36 million bales versus 120.89 last year, and consumption is expected at 116.56 million bales versus 116.02 million in 2024/25. This would put ending stocks at 78.11 million bales versus 78.86 million last year.

COCOA

July Cocoa traded above the 100-day moving average on Friday but closed back below it. The market trading back and forth around that line today, probably finding some support from the agreement between the US and China over the weekend to pause the tariffs for 90 days, which could be viewed as positive for demand. Reuters reported that Ivory Coast port arrivals totaled 24,000 metric tons last week, down from 31,000 the previous week and below the five-year average of 30,000. Cumulative arrivals for the 2024/25 marketing year have reached 1.560 million tons, up from 1.379 million at this point a year ago but below the five year average of 1.782 million. World Weather Service says indications are that scattered showers and thunderstorms fell over the weekend in West Africa, tending towards sporadic and light in Nigeria and wetter in Ivory Coast and Ghana. More rain is expected this week, and although it could be sporadic, it should be beneficial for crop development. ICE certified stocks increased by 9,501 bags on Friday to 2.112 million, their highest since September 27.  Stocks increased 32,270 bags last week versus an increase of 113,481 the previous week. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 452 contracts of cocoa for the week ending May 6, reducing their net long to 14,079.

COFFEE

July Coffee is lower this morning in the wake of another revision higher in Brazilian coffee forecasts for 2025/26. This latest revision came from Safras & Mercado late Friday, when it raised the all-coffee production forecast to 65.51 million bags, up from 62.45 million forecast in in December. Safras & Marcado credited better weather conditions in January and February. This is in line with a forecast the group made in mid-April. The robusta crop is projected to be around 25 million bags versus 24 million in the December forecast, and arabica production is projected at 40.46 million bags, up from 40 million in mid-April and 38.35 million in December. Last week, Conab raised its forecast for Brazilian arabica production to 37 million from 34.7 million estimated in January and its total forecast to 55.7 million from 51.8 million in January.  World Weather Service that welcome rains were seen Vietnam over the weekend, and more are expected. Brazil should see some net drying over the next 10 days, and temperatures will be warmer than usual. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 139 contracts of coffee for the week ending May 6, increasing their net long to 41,748. This is well below the record high of 72,000 from April 2024. ICE certified stocks decreased by 810 bags on Friday to 838,168. Stocks pending review increased by 22,341 bags, to 136,066, the highest since February 18.

SUGAR

July Sugar gapped higher this morning and traded to its highest level since April 29 as the market reacted positively to the 90-day pause on the retaliatory tariffs between the US and China. The stock market and crude oil also reacted positively to the news, and this also lent support for sugar. The fact that the two sides met and were able to reach an agreement at least shows some progress. Last week, China was reported to be buying Brazilian sugar, and traders noted an increasing line-up of vessels to load Brazilian sugar for export, which is expected at this time of the year when the local harvest starts to pick up. The UNICA report on Brazil center-south production for the second half of April should be released tomorrow or Wednesday (it usually happens by the 15^th of the month). Recent rainfall there may have slowed the harvest down after it got off to a quick start. In the first half of April, center-south crush cane came in at 16.598 million tons, up from 16.117 million a year ago (+3%), and sugar production was 731,000 tons, up from 722,000 for the same period last year (+1.3%), %). Brazilian government data released last week showed sugar exports totaled 1.56 million metric tons April, down 18% from the a year ago. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 23,260 contracts of sugar for the week ending May 6, reducing their net long to 11,269.

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