Softs this week settled mixed:Â SBK0 -0.98 (-6.48%), KCK0 +1.10 (+1.00%), CCK0 -171 (-6.01%), CTH0 -7.34 (-10.65%).Â
May sugar on Friday fell to a 1-1/2 month low and finished the week down -6.48%. Weakness in crude prices and a slump in the Brazilian real to a new record low Friday weighed on sugar prices. The Brazilian real on Friday fell -0.39% against the dollar and posted a new record low of 4.5138 reals/USD. A weaker real encourages export selling by Brazil’s sugar producers. Crude oil prices fell more than 4% Friday to a 14-month low. Lower crude prices are negative for ethanol prices and may prompt Brazil’s sugar mills to divert more cane crushing toward sugar production rather than ethanol production, thus boosting sugar supplies. Unica on Friday reported that Brazil’s 2019/20 Center-South sugar production Oct-through mid-Feb is up +0.48% y/y to 26.488 MMT with the percentage of sugar cane crushed for sugar falling to 34.47% from 35.42% last year and the percentage of cane crushed for ethanol production rising to 65.53% from 64.58% last year. Conab on Dec 19 cut its Brazil 2019/20 sugar production estimate by -5.3% to 30.1 MMT from an Aug estimate of 31.8 MMT. An extremely large net-long position held by funds makes the sugar futures markets vulnerable to long liquidation pressure. Friday’s Commitment of Traders (COT) data showed that funds boosted their long N.Y. sugar positions by +6,367 contracts in the week ended Feb 25 to a 3-year high of 165,132 contracts. A bullish factor for sugar was the action by the International Sugar Organization (ISO) on Friday to raise its global 2019/20 sugar deficit estimate to an 11-year high of -9.4 MMT from a November estimate of -6.1 MMT.
May arabica coffee on Friday closed higher and finished the week up +1.00%. Coffee found support on speculation the coronavirus outbreak will have only a limited impact on coffee demand. Starbucks late Thursday said that the slowing of new coronavirus cases in China has allowed it to open 85% of its 4,292 stories in China. Recent heavy rain in Minas Gerais, Brazil’s largest arabica coffee-growing region, are also positive for coffee. Somar Meteorologia reported last Monday that rainfall in Minas Gerais measured 131.8 mm in the past week or 304% of the historical average. Those heavy rains saturated Brazil’s coffee fields and may curb coffee yields. A bearish factor for arabica coffee is the weakness in the Brazilian real, which fell -0.39% Friday and posted a new record low of 4.5138 reals/USD. A weaker real encourages export selling of arabica coffee by Brazil’s coffee producers.
May cocoa prices on Friday tumbled to a 1-1/2 month low and finished the week down -6.01%. Cocoa prices trended lower this past week on concern the spread of the China coronavirus will derail the global economy and demand for commodities, including cocoa. Cocoa prices were already on the defensive on the outlook for a smaller global cocoa deficit. Marex Spectron on Tuesday reduced its global 2019/20 cocoa deficit estimate to 25,000-50,000 MT from a Jan estimate of 100,000 MT, citing timely rains that may boost West African cocoa yields. Cocoa prices are also under pressure from ample cocoa supplies from the Ivory Coast, the world’s biggest producer. The Ivory Coast government on Monday reported that Ivory Coast farmers sent 37,128 MT of cocoa to ports from Feb 17-23, up +40% from the same time last year. On a cumulative basis, Ivory Coast farmers sent 1.61 MMT of cocoa to ports during Oct 1-Feb 23, up +8.8% y/y. Another negative for cocoa prices is the forecast for rain in West Africa. A meteorologist at Marex Spectron on Monday said that average rainfall is forecast across West Africa through the middle of March. Cocoa prices last week previously saw support on warm temperatures in Ghana and a lack of rainfall in the Ivory Coast and Ghana. An extremely large net-long position held by funds makes the N.Y. cocoa futures markets vulnerable to long liquidation pressure. Friday’s Commitment of Traders (COT) data showed that funds boosted their long N.Y. cocoa positions by 797 contracts in the week ended Feb 25 to a 6-year high of 77,780 contracts.
Mar cotton on Friday plunged to a 4-1/2 month low and finished the week down sharply by -10.65%. Cotton prices sold-off this week on concern global cotton demand may be ravaged if the China coronavirus expands into a pandemic. Chinese demand concerns are negative for cotton after the USDA in the Feb 11 WASDE report cut its China 2020 cotton demand forecast to 37.5 mln bales from 38.5 mln bales forecast in Jan. China’s economy is seeing significant damage from the quarantining of large swaths of China’s population and large-scale business shutdowns as many China cotton mills remain closed due to a lack of workers, which will further crimp China’s demand for cotton. The USDA on Feb 11 unexpectedly kept its U.S. 2019/20 cotton ending stocks estimate unch at a 12-year high of 5.40 mln bales and hiked its global 2019/20 cotton ending stocks estimate to a 4-year high of 82.12 mln bales. Chinese cotton demand was already weak after China Dec cotton imports fell -29.8% y/y to 150 MT. China’s Agriculture Ministry on Jan 10 raised its China 2019/20 cotton import estimate to 1.8 MMT from a prior forecast of 1.6 MMT due to improvement in U.S./China trade relations. Chinese cotton production has declined after China’s National Bureau of Statistics on Dec 16 reported that China 2019 cotton production fell -3.5% y/y to a 2-year low of 5.89 MMT. The USDA estimates that Chinese 2019/20 cotton ending stocks will fall to an 8-year low of 7.238 mln bales. Another bearish factor was the Feb 18 forecast from the Cotton Association of India that 2019/20 cotton production in India, the world’s biggest cotton producer, may climb +13.6% y/y to 35.45 mln bales. Â