Exports Slowdown Feared

COTTON

March cotton is under the bearish influence of a reversal lower on Friday that came in response to a disappointing export sales report last week. After five weeks of strong export sales and shipments, they fell back last week, and this sparked some concern that US prices had gotten too high to be competitive on the world market. There are also concerns that exports to China may slow ahead of Lunar New Year, which is set to begin around February 10. Cotton has also drawn support from the stock market rally, which could leave it vulnerable to heavy selling if stocks correct.

COCOA

Cocoa prices continue to find support from bullish supply developments and an improving demand outlook, and the market appears to be heading to a test of last week’s 46 1/2 year high. The market had a sweeping reversal top day last Thursday, but it has been working higher since, as weather reports out of West Africa have recently turned bullish. There are reports that Harmattan winds in Nigeria have been particularly harsh this season, which could negatively impact their 2023/24 production. The Harmattan has also returned to Ivory Coast, raising concerns that it could damage developing cocoa pods for the mid-crop, which begins in April. Just last week, farmers were reporting on how favorable the weather had been and how well the crop looked. The dry season runs through March. Ivory Coast port arrivals remain far behind last season’s pace after nearly four months of main crop production.

COFFEE

Coffee prices continue to see coiling action while holding above their 50-day moving average. March coffee was higher overnight, but it was confined to yesterday’s range. Traders are watching the weather in Brazil to see if the current rain event will be enough to ease concerns about the dry conditions there. Vietnam’s General Statistics Bureau reported that it expects that nation’s January coffee exports to reach 210,000 tonnes, which would be up 47.6% from the same period last year. The market has been supported recently on reports that the attacks on ships in the Red Sea have interrupted movement of robusta coffee from Asia to Europe. Data from the European Coffee Federation indicate that European supplies ate the lowest in seven years. ICE exchange coffee stocks fell 5,741 bags on Monday and are now 7,759 bags, taking them below where they were at the end of December. A pullback in the Brazilian currency yesterday may encourage producers to sell.

SUGAR

Brazil’s 2023/24 season may be in its final stages, but its record output could continue to limit gains. Their Center-South sugar production this season was 25.5% ahead of last season as of mid-January. Exports have been slowed by port congestion and a lack of containers, but they are expected to reach a record as well. Monday’s pullback in the Brazilian real may encourage mills to shift some of their crushing back to sugar production after a significant move towards ethanol since mid-December. Cyclone Kirrily, which struck Australia’s Queensland state last week, did not significantly damage sugar crops or farm infrastructure, according to the industry group Canegrowers. The Bangladesh government is considering a move to cut import taxes for sugar. This underscores the tight supply in Asia after the disappointing Thai and Indian crops last year. India continues its export ban, and Thailand’s production may fall 25% below last season.

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