COFFEE
March coffee’s reversal off a six-week low yesterday indicated strong buying interest. The attacks on cargo ships in the Red Sea have roiled the global coffee trade, sending Robusta prices to their highest level in 29 years and lending support to Arabica as well.
A Bloomberg report said that buyers of Robusta beans are avoiding purchases from Vietnam due to surging shipping costs and longer than normal travel times and are switching to origins that do not require passage through the Red Sea, particularly Brazil. This report contrasts with stories earlier this week saying Vietnamese farmers were holding out, waiting for higher prices.
COCOA
Fourth quarter 2023 grindings for European, Asia, and North America all declined from the previous year, but the results were not as low as expected, and the cocoa market responded with a move to new 46 1/2 year highs. During yesterday’s session, the European Cocoa Association reported 4th quarter grindings at 350,739 tonnes, down 2.5% from last year, but this compares to expectations for declines of 2-5%. This was the second lowest 4th quarter grind of the past seven years. Only pandemic-hit 2020 was smaller.
The Cocoa Association of Asia put their 4th-quarter grindings at 211,202 tonnes, 8.5% below last year but in line with expectations. This was their lowest 4th quarter grind since 2018 and the lowest total for any quarter since the 3rd quarter of 2021. After the close yesterday, the National Confectionaries Association put North American 4th quarter grindings at 103,971 tonnes, down 2.95% from 2022, but this was better than expectations calling for a decline of 6-8%.
COTTON
The cotton market seems to be encouraged by the positive US economic data this week, with a strong December retail sales number on Wednesday and strong Housing Permits and low initial unemployment claims numbers yesterday. The recovery in the US stock market this week also lends support on ideas it is bullish for consumption. March cotton extended its rally overnight and traded to its highest level since December 8.
The market has pushed through the 0.382 retracement of the September-November decline at 82.51, and that level could be a key support area today. Bullish traders are hoping that today’s export sales report will show strong sales to China.
SUGAR
March sugar has staged an impressive rally off the December low, but this has put the market in a short-term overbought condition, which could leave it vulnerable to a setback. Lower production in India and Thailand is outweighing the strong Brazilian crop in the market’s eyes. India’s sugar output is running 7% behind last season, and Thailand’s 2023/24 production is expected to come in around 8-8.5 million tonnes, down 25% from 2022/23. Brazil’s major cane-growing regions have forecasts for daily rainfall through late next week, which should benefit their upcoming 2024/25 crop.
Dry weather in Brazil extended the harvest and crushing season into this year, but it has also sparked concerns about the upcoming crop. Cane growers in Queensland, Australia are bracing for a tropical cyclone that is forming off the coast and is expected to hit by late Sunday or early Monday. This would be the second cyclone in a little more than a month. The previous storm flooded croplands and left residents stranded on top of houses. Queensland is Australia’ biggest sugar producing state.
Source: Admis
