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Robusta Production Concerns


Despite strong Arabica crops in Brazil and Colombia, March coffee traded to new eight-month highs last week on concerns over Brazil’s robusta production. A major Brazilian co-op is estimating their 2024/25 robusta crop could see losses of 15% to 25% due to drier than normal weather and above-average temperatures in the main producing state of Espirito Santo. Soil moisture is currently at its lowest level in seven years. Robusta crops in Vietnam and Indonesia are down this year, and El Nino threatens to bring drier than normal conditions to those nations this winter. ICE exchange coffee stocks were unchanged on Friday, but coffee waiting to be graded increased by more than 4,000 bags and finished the week with 30,890 pending review. The likelihood that ICE stocks will continue to increase into year-end weighed on prices late last week. A pullback in the Brazilian currency also pressured coffee on Friday on ideas it will encourage Brazilian farmers to market their remaining supplies, but sources told Reuters that Brazilian farmers are holding back in anticipation of higher prices off concerns about robusta output.

coffee in wood spoon


The cocoa market saw some negative technical action last week, but it has also received some bullish supply news overnight. Ivory Coast cocoa arrivals for the week ending December 12 totaled 62,000 tonnes, down from 106,000 for the same week last year. Total arrivals since the marketing year began on October 1 have reached 674,000 tonnes, down 36.4% from the same period last year. Arrivals keep falling further and further behind. A Reuters story overnight quoted unnamed sources in Ivory Coast that their nation’s cocoa production for 2023/24 is expected to come in at 1.75 million tonnes, down from a previous forecast of 1.8 million and down from 2.3 million in 2022/23. They blame the spread of swollen shoot disease, which is a viral disease, endemic to west Africa, that kills cocoa trees within a few years. With prices at 46-year highs, traders are wary of a potential top. They are concerned about the effects high prices will have on demand, but the swollen shoot issue presents a long-term threat to global cocoa supply.


An improvement in the weather for Brazil, projections for ample global cotton supply in 2023/24, and a slow US export pace undermine support for the cotton market. Returning rain to Brazilian crop areas in the coming 6-10 days should be good for planting, germination, and emergence in Bahia and possibly some areas in center west. The USDA is projecting Brazil’s 2023/24 cotton exports at 11.50 million bales versus 6.66 million in 2022/23 and 7.73 million in 2021/22. Recent rainfall in Texas may have slowed the tail end of the harvest, but it likely helped recharge soils after the droughts of the past years, which would be beneficial for the 2024/25 crop. The Delta is expected to see decent rainfall this week, which could help improve soil moisture there as well. El Nino tends to bring cool and wet conditions to the southern US during the winter months. Higher crude oil prices overnight are supportive to the cotton market because it increases the cost of producing man-made fibers. However, the bounce last week in the dollar is negative for US export prospects.


The sugar market has received bullish supply news that could help the market find its footing. The Indian government has decided to allow sugar mills to divert some cane juice to ethanol production after banning it earlier this month. The threat of production problems in Thailand due to El Nino is a supportive element, while record production from Brazil’s Center-South region continues to be a source of pressure.


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