Softs this week settled mixed: SBH0 +0.11 (+0.86%), KCH0 +3.40 (+2.94%), CCH0 -49 (-1.87%), CTZ9 +0.98 (+1.55%). Mar sugar on Friday climbed to a 9-month nearest-futures high and finished the week up +0.86%.
Sugar prices rallied on global sugar production concerns as Marex Spectron on Friday cut its India 2019/20 sugar production estimate to 27.2 MMT, 15% lower than its March estimate. Also, Marex Spectron today cut its Thailand 2019/20 sugar production estimate to 12.2 MMT from a March projection of 13.6 MMT. Sugar prices were already in rally mode this week after Unica on Tuesday reported that Brazil’s Center-South sugar mills produced 786,000 MT of sugar in the first half of this month, below expectations of 820,000 MT. Total Center-South 2019/20 sugar production through mid-Nov is 26.009 MMT, up +2.79% y/y. Another bullish factor was ISO’s move on Tuesday to raise its global 2019/20 sugar deficit estimate to -6.1 MMT from a September projection of -4.8 MMT. A negative for sugar prices is weakness in the Brazilian real which slumped to a record low against the dollar on Tuesday of 4.2684 reals/USD. A weaker real encourages export selling by Brazil’s sugar producers.
Mar arabica coffee on Friday closed higher and finished the week up by +2.94%. March arabica coffee on Monday rallied to a 4-1/2 month high and nearest-futures (Z19) posted a 1-year high on concern about dry weather in Brazil. Monday’s data from Somar Meteorologia showed that rainfall in Minas Gerais, Brazil’s largest arabica coffee growing region, was only 38.3 mm over the past week, or 59% of the historical average. The outlook for smaller output and exports from Brazil is positive for coffee prices. The USDA’s FAS on Nov 21 said Brazil 2019/20 coffee production may slide -10.5% y/y to 58 mln bags from 64.8 mln bags in 2018/19. The USDA’s FAS also forecast that Brazil 2019/20 coffee exports will slide -14.7% y/y to 35.32 million bags. Current arabica coffee supplies continue to decline, which is also providing support to coffee prices, after ICE-monitored arabica coffee inventories fell to a 1-1/4 year month low of 2.145 million bags on Nov 22. A bearish factor for coffee prices was Tuesday’s projection from the USDA’s Foreign Agricultural Service (FAS) for 2019/20 coffee production in Columbia, the world’s second-largest producer of arabica coffee, to climb +3.1% to 14.3 million bags. Another negative for coffee prices this week is weakness in the Brazilian real that may prompt Brazil’s coffee producers to boost their export selling in response to the weak Brazilian real. The real sank to a record low against the dollar Tuesday’s of 4.2684 real/USD.
Mar cocoa prices on Friday fell to a2-1/2 week low and finished the week down -1.87%. Mar cocoa fell to a 2-1/2 week low Friday on robust supplies from the Ivory Coast, the world’s biggest cocoa producer. Monday’s data from the Ivory Coast government showed that Ivory Coast farmers sent 623,005 MT of cocoa to ports during Oct 1-Nov 24, up +5.0% y/y. Mar cocoa had posted a 1-week high Tuesday on tighter supplies as ICE-monitored cocoa inventories have trended lower over the past five months and posted a 2-3/4 year low of 3.006 million bags on Wednesday. Also, the International Cocoa Organization (ICO) on Friday said the global 2018/19 cocoa market will fall into deficit of -21,000 MT from a previous estimate for a global surplus of +18,000 MT. Reduced output from Ghana, the world’s second largest cocoa producer, is another supportive factor for cocoa prices. Friday’s data from the Ghana Cocoa Board showed it purchased 257,464 MT of cocoa from farmers during Oct 1-Nov 21, down -1.4% y/y, illustrating reduced supplies.
Dec cotton on Friday closed lower but still finished the week up +1.55%. Dec cotton rallied to a 3-week high Wednesday on speculation China will boost its cotton imports after China’s National Food & Strategic Reserves Administration said it will stockpile 500,000 MT of cotton for state reserves. Also, on Friday Cotlook cut its global 2019/20 cotton surplus estimate to 636,000 MT from an Oct forecast of 881,000 MT. Cotton prices retreated on Friday, however, on concern U.S./China trade talks may be in peril after China’s foreign ministry on Thursday said it will retaliate for U.S. legislation that was passed supporting Hong Kong protesters. Supplies are ample as the USDA projects U.S. 2019/20 cotton ending stocks at 6.1 mln bales, an 11-year high. Dec cotton slumped to a contract and 3-1/2 year nearest-futures (V19) low Aug 26 when President Trump on Aug 23 raised tariffs on Chinese imports. USDA data shows the share of U.S. cotton of China imports fell to 18% in 2018/19 from 45% in 2017/18, well below the 30% share seen over the previous 5 years. The USDA estimates China 2019/20 cotton ending stocks will fall to 7.238 ln bales, an 8-year low. Monday’s USDA Crop Progress report showed 78% of the U.S. cotton crop was harvested as of Nov 24, +4 pts above the 5-year average.