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Dry Brazil Weather Affects Sugar

COCOA FUTURES

December cocoa was weaker overnight as the market consolidated its recent gains. A risk-off attitude this week may be sparking concerns about demand. West Africa is expected to see moderate to high rainfall over the next 10 days, which could delay harvesting, and yet traders are also concerned that El Nino will bring abnormally dry conditions to the region and ultimately result in lower production. There were reports that Ghana’s Cocobod is considering raising their 2023 main crop farmgate price by 63% to discourage farmers from smuggling supplies into Ivory Coast, where they have been receiving higher prices.

COFFEE FUTURES

Recent rainfall over Brazil’s major Arabica growing regions has slowed down the harvest, and that has provided support to prices. Brazil’s largest co-op, Cooxupe said that their farmers had completed 95.0% of their harvest by last Friday versus 94.9% for the same period last year. The gap between last year and this year has narrowed due to the rain. Sluggish global risk sentiment has weakened the near-term outlook for restaurant and retail shop consumption, and Deutsche Bank has downgraded its outlook for JDE Peet’s, one of the world’s largest coffee companies from “buy” to “hold,” on signs that rising coffee prices are limiting consumer demand. Robusta coffee prices are hovering around 28-year highs. There were reports earlier this year that roasters were substituting Arabica coffee for robusta in some of their blends, which suggests that the NY (Arabica) market could continue to draw support until robusta supplies recover.

COTTON FUTURES

December cotton sold off sharply on Wednesday and continued to do so overnight, as the market has looked beyond the decline in US cotton conditions this week and focused on a poor demand outlook. The rally in the dollar to its highest level since March makes US cotton more expensive on the world market. The recent weekly US export sales report showed that cumulative sales for 2023/24 had only reached 44% of the USDA forecast for the marketing year versus a five-year average of 54% for this point in the season. This suggests that the USDA could lower its export forecast in future supply/demand reports. Traders are also concerned about Chinese demand because of their sluggish economy. China has been the biggest importer of US cotton this year.

SUGAR FUTURES

A return of hot and dry weather to Brazil has pulled support from the sugar market after it rallied back near 13-year highs on Tuesday. The market has been in a tug of war between strong current-year production out of Brazil and concerns about upcoming crops in Thailand and especially India. A recent bout of wet weather in Brazil has slowed cane processing, but with mostly hot and dry weather forecast for the next 15 days, sugar production is expected to resume its strong pace. The Brazilian real has fallen to its lowest level in almost three weeks, which puts additional pressure on prices, as it encourages mills to produce more sugar for export

 

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