Drying Trend Continues

COCOA

September Cocoa extended Friday’s declines overnight. The tariffs announced by the US last week left rates at the minimal 15% for Ivory Coast,  Ghana, Ecuador, Cameroon, Nigeria, Colombia, and Venezuela. World Weather Service says much of Ivory Coast and Ghana were either dry or received only very light rainfall over the weekend, allowing net drying to continue in many areas. Rain was a little more significant in eastern Nigeria and western Cameroon. The sporadic rainfall pattern is expected to continue this week, with rains increasing during the second half of the month. A dry pattern in late July/early August is typical, and it should be beneficial for pod development given the buildup of moisture over the previous couple months, but some support could develop off dry weather concerns.

COTTON

December Cotton was slightly higher overnight following Friday’s selloff in the wake of the disappointing jobs report. It didn’t help that the US announced sharp tariff increases set to begin August 6, which could discourage global demand and also put the US cotton exports at a disadvantage to Brazil. The dollar also rallied sharply on Friday, which makes US exports less competitively priced on the global market. All of those factors have moderated slightly overnight, which has allowed cotton to recover a bit. The US crop is in good shape, but conditions may show a slight decline this week following dry weather in Texas last week. World Weather Service says unirrigated West Texas has seen some drying in the past week and that cotton areas still need greater rain and some additional warm weather to support “the best” dryland production. Other areas in Texas are seeing highly varying weather and soil conditions. Timely rain will become increasingly important in the next two weeks. South Texas crops are maturing and beginning to be harvested. Delta crops are drying down, but it looks as though timely rain may evolve during the coming week to ten days. The southeastern U.S. cotton areas in the nation are also expected to receive periodic rain with some of that moderate to heavy this week.

SUGAR

October Sugar is back above Friday’s high this morning after selling off Friday on the low-risk impulse in the wake of the disappointing jobs data and the new tariff announcements, as well as a recovery in Brazilian production in the first half of July that were reported on Thursday. The Trading Corporation of Pakistan has issued a new tender to purchase 100,000 metric tons of white refined sugar with a deadline for submission of price offers is August 11, and this is being viewed as an indication that Pakistan will make no purchase in its previous tender for 100,000 tons of sugar for July 31. In July, the Pakistan government approved plans to import 500,000 tons of sugar to help to maintain price stability due to a sharp rise in retail prices since January. This is the third tender after the first two failed. Traders interviewed by Reuters said three companies participated in the July 31 tender but none were selected. World Weather Service says southern India will see increasing rainfall this week, easing long term dryness and improving late season summer crop prospects. One of India’s three major cane producing states, Maharashtra, is in the southern part of the country.

COFFEE

China announced over the weekend that it has approved 183 new Brazilian coffee companies to export products into that country, as Brazil looks to find new markets for the roughly 8 million bags it sells to the US every year now that the US has imposed 50% tariffs on Brazilian imports, which are slated to go into effect on August 6. So far coffee has not been exempted from the tariffs. According to Cecafe, Brazilian coffee exports into the US totaled 440,034 in June, almost eight times more than their sales to China. Some have suggested that exporters will to try to avoid the tariffs by routing coffee through other countries first. Reuters quoted Debajyoti Bhattacharyya, commercial vice president at agricultural commodities firm AFEX Ltd., that this could bring the tariff effect down to a 10% or 15% given the lack, of a traceable supply chain. The US-based Coffee Trading Academy expects Brazil’s 2026 coffee crop to be 15.3% larger than 2025, based on a survey of Brazilian farmers. The survey also indicated that total production this year will be 2.11% smaller than 2024, which is no surprise given that this is the off-year for the arabica crop and that this year’s crop suffered to some degree from last year’s drought, though forecasts have been revised higher from earlier this year.

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