COCOA
The cocoa market has repeatedly made contract highs over the past several months, and it is technically overbought and vulnerable to a selloff, but there has been no indicator of a top, global supplies are tight, and heavy rainfall in the primary production areas continue to raise concerns about the current crop. There were additional reports overnight that continued heavy rainfall is threatening the quality of cocoa in Ivory Coast, the world’s top producer, as farmers are unable to sufficiently dry their beans. Across west Africa, there have been reports of smaller bean size and issues with black pod disease, flooding, and heavy rains tearing off flowers and destroying pods, which affect next year’s crops. A rally in the Euro to its highest level in two months overnight provides additional support to cocoa on ideas it will help European grinders acquire near-term supplies. Ivory Coast port arrivals for the week ending July 9 came in slightly above year-ago levels, but total arrivals for the current marketing year that began in October are 4.3% below last year.
COFFEE
Coffee prices continue to see coiling price action as the market has lacked direction since late in June. This may set the stage for a trend decision, and with improving global risk sentiment this week, coffee may benefit from a better demand outlook and see an upside breakout move. On the other hand, the US CPI number on Wednesday could damage risk sentiment if it comes in higher than expected. Below normal rainfall last week over Brazil’s major Arabica growing areas should help minimize any delays in this season’s harvest. While Colombia’s annualized pace remains close to a 9 1/2-year low, their June production came in slightly above last year. Vietnam’s potential issues with their upcoming 2023/24 crop will primarily impact global robusta production, but this could have a supportive effect on Arabica prices, as many retailers are able to replace robusta with Arabica in their consumer blends. Vietnam’s coffee exports in June were estimated at 471,607 tonnes, according to the General Department of Vietnam Customs. This is up 2.2% from a year ago. However, first-half of 2023 shipments are down 3.1% from last year.
COTTON
Uncertainty over this year’s crop and mixed signals on demand are keeping the cotton market trading a range. Lower than expected Chinese CPI and PPI readings cast doubt on China’s economic recovery on Monday. Chinese PPI fell for the ninth consecutive month in June, down 5.4% from a year earlier. The CPI was unchanged year on year versus a 0.2% gain in May. This does not bode well for US cotton’s biggest export customer. Monday’s Crop Progress report showed 48% of the US cotton crop was rated good/excellent (G/E) as of July 9, unchanged from the previous week, up from 39% a year ago and slightly below the 10-year average of 50%. Higher than normal temperatures and lower than normal precipitation is forecast for Texas over the next seven days, and this is expected to lower soil moisture across the state. This could worsen crop conditions, especially in the unirrigated areas in west Texas. For Wednesday’s USDA monthly supply/demand (WASDE) report, the average trade expectation for US 2023/24 cotton production is 16.53 million bales, with a range of expectations from 16.00 to 17.00 million. This would be up slightly from 16.50 million in the June report.
SUGAR
Sugar prices have kept within a tight trading range for the past four sessions, which may signal a trend decision is close at hand. Expectations that Brazil’s Center-South production will remain well ahead of last season’s pace has been weighing on the market. The Unica Center-South supply report for the second half of June will be released today, and the report is expected to show cane crush and sugar production have remained well ahead of last season. High sugar prices have encouraged Brazilian millers to favor sugar over ethanol this year. The strong harvest pace should help Brazil’s sugar exports during the third quarter come in well above last year, which could offset lost supply from India’s sugar export ban. However, a Reuters story overnight cited cane growers’ concerns that scanty monsoon rains in India’s Maharashtra and Karnatka states would reduce sugar output for the upcoming season.
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