COFFEE
December coffee eased overnight after a strong close yesterday. The market has been consolidating its breakout rally from last week that came in the wake of a steep decline in ICE exchange stocks, but the market has been met with a mix of conflicting fundamental inputs over the last few sessions. On the negative side for prices, Colombia’s National Federation of Coffee Growers reported that their nation’s coffee production in November totaled 1.28 million bags, up 25% from the same period last year. Over the last 12 months, production has totaled 11.1 million bags, which is close to year-ago levels. Production has improved substantially over the last three months, climbing from 849,000 bags in September to 1.15 million in October, indicating that output is recovering from three years of La Nina. The International Coffee Organization is expecting a global production surplus of 1 million bags in 2023/24 due to a 5.8% increase in production and a 2.2% increase in consumption. On the plus side for prices, Vietnam’s Coffee and Cocoa Association said their nation’s 2023/24 coffee crop will come in 4.5% to 10% below last season. Vietnam mainly produces robusta coffee, but they are the world’s second largest coffee growing nation overall, and the magnitude of this season’s projected decline has underpinned coffee prices. ICE exchange coffee stocks rose by 5,275 bags Tuesday, but 41% of the coffee that went through the grading process failed to be approved.
COCOA
The cocoa market has taken on a bearish tone this week with reports of better availability of beans from Ivory Coast. Recent rains mixed with periods of sunshine have been ideal for production. This marks a significant improvement from earlier in the season, when consistent, heavy rains disrupted harvest and encouraged disease. As of Sunday, Ivory Coast arrivals for the 2023/24 marketing year, which started on October 1, were running 35% behind year-ago levels. The dry season is approaching, which should eventually bring a slowdown in west African production until next spring. Last week, the International Cocoa Organization released its latest forecast for the 2022/23 global supply outlook, in which they reduced the global deficit to 99,000 tonnes from 127,000 previously. Declines in the Euro and British Pound this week may have also pressured cocoa prices on the idea that the weaker currencies make cocoa more expensive for European grinders.
SUGAR
March sugar resumed its downtrend overnight and broke below a key technical support level, which could induce aggressive selling today. Brazilian sugar production is running well ahead of last year, and a jump in exports in November indicates that port congestion has eased and is helping alleviate tight global supplies. Czarnikow this week revised its outlook for 2023/24, going from a forecast for a 3.0 million tonne global supply deficit to a surplus of 200,000. EU and UK production is expected to increase by 1 million tonnes to 16.7 million due to a strong beet crop. StoneX has reported that India’s October/November sugar production came in at 4.3 million tonnes, which was lower than last year but higher than the five-year average and not as low as feared earlier in the season. As of November 28, managed money traders were holding a net long of 168,998 contracts of sugar, which was in the upper end of the historic range. This leaves the market vulnerable to heavy selling as support levels are violated. Prices have fallen 11% since the data was collected, but the size of the net long suggests more liquidation is possible.
COTTON
March cotton rallied sharply yesterday and overnight in the wake of a large decline ICE certified stocks. Stocks fell from 87,770 on November 30 to 6,625 as of December 4, an 81,445-bale (93%) drop in just two sessions. This is the lowest they have been since September, when stocks started building as the new crop was harvested. There were 67,700 bales delivered in Galveston, Texas, which is an indication of strong export demand. ABARES, the Australian government’s agricultural statistics agency, is forecasting cotton output for the summer months to be down 26% this year to 925,000 tonnes. The trade is not looking for many changes in Friday’s USDA Crop Production and supply/demand reports.
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