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Coffee Prices Find Their Footing


Coffee prices have found their footing well above last Friday’s low, but they remain over 13 cents below their late December highs. While the market will have to overcome negative global risk sentiment, coffee continues to find support from recent bullish supply developments. Drier than normal conditions over Robusta growing regions in Vietnam, Indonesia and Brazil have supported coffee prices early this week. Vietnam’s 2023 coffee exports were 9.6% below their 2022 total. While their farmers held back on sales to wait for higher prices, last year’s export decline also reflects Vietnam’s 2022/23 and 2023/24 production being the two lowest over the past seven seasons. The Brazilian currency lost 1.4% in value on Tuesday, and that kept further coffee price gains in check as Brazil’s farmers may be encouraged to market their near-term coffee supply to foreign customers.

coffee spilling from cup


Cocoa prices have lost upside momentum this morning due to negative global risk sentiment and pressure from key outside markets. The Euro, British Pound and US equities have started 2024 with sizable losses that put carryover pressure on cocoa prices as their weakness could soften near-term demand prospects. However, supply fundamentals look to be returning front-and-center as the new trading year begins. While West Africa is well into its dry season, heavy rainfall during September and October left soil moisture at adequate levels, and that has increased optimism towards upcoming midcrop production. Many West African growing areas do not have adequate fertilizer and pesticide coverage, so recent wet weather increases the chances for diseases and pests to spread. As a result, a significantly diminished West African production outlook this season should support prices near-term.


The cotton market started 2024 by breaking a six-session winning streak as near-term demand concerns outweighed the prospects for fresh export business. While a “risk off” mood in global markets should weigh on prices, they should stay well clear of their late December lows. The Dollar’s sizable gain on Tuesday also pressured prices as a stronger Dollar diminishes US cotton in the global export market. In addition, a more than 1% loss in the Brazilian currency Tuesday providing a “double whammy” for the cotton market as that should make Brazilian cotton more appealing to export customers. There are reports that India’s government is looking at shifting their domestic cotton growing areas from disease-infested fields to disease-free irrigated areas. This could provide a significant boost to India’s upcoming cotton production which has fallen well below its record high from the 2017/18 season, and that in turn could result in a sizable boost to India’s cotton exports.


Sugar continues to see coiling price action at the start of the new trading year, but the market has been able to hold its ground above its late December lows. With south Asian supply issues providing support, sugar should be able to extend a recovery move during early January. A major Indian trade group reported their nation’s fourth quarter 2023 sugar production at 11.21 million tonnes, a 7.6% decline from last year’s fourth quarter total which has provided support to the sugar market. India’s decision to allow for 1.7 million tonnes of sugar production to be diverted to ethanol production has provided support to prices. Thailand’s 2023/24 sugar production is expected to have a sizable decline from last season, due in large part to drier than normal conditions from El Nino. This has provided support to sugar prices, as that will result in a sizable decline in their sugar exports while India continues to ban sugar exports so far this season.


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