Softs last week settled lower:Â SBK0 -1.32 (-10.14%), KCK0 -0.65 (-0.61%), CCK0 -136 (-5.31%), CTK0 -2.30 (-3.66%).Â
May sugar on Friday closed higher, but still finished the week down sharply by -10.14%. Sugar prices were under pressure over the past week and tumbled to a 5-1/2 month low Thursday. Weakness in the Brazilian real and in crude oil prices weighed on sugar prices. The real slumped to a record low against the dollar of 5.0258 reals/USD on Thursday. The weaker real encourages export selling by Brazil’s sugar producers. Also, crude oil prices plunged to a 4-year low on Monday. The slump in crude oil prices has been 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. Another negative for sugar was Wednesday’s forecast by Sucden that Brazil 2020/21 Center-South sugar output will climb +24% y/y to 33 MMT. On Tuesday, sugar-producer Raizen said that the slump in crude prices to a 4-year low will prompt Brazil’s sugar mills this year to divert more cane crushing toward sugar production rather than ethanol production, which may boost Brazil 2020/21 sugar output by 6 MMT. Sugar prices were undercut by Wednesday’s news from Unica that Brazil’s 2019/20 Center-South sugar production Oct-through-Feb rose +0.47% y/y to 26.487 MMT. The percentage of sugar cane crushed for sugar fell to 34.46% from 35.40% last year and the percentage of cane crushed for ethanol production rose to 65.54% from 64.60% last year.Â
May arabica coffee on Friday closed lower for a third day and finished the week down -0.51%. Coffee prices tumbled to a 1-month low Monday on drier weather in Brazil that will allow rain-soaked coffee farms to dry out after the recent heavy rain. Somar Meteorologia on Monday reported that rain in Minas Gerais, Brazil’s largest arabica coffee-growing region, was only 21.3 mm in the past week, or only 39% of the historical average. Also, weakness in the Brazilian real against the dollar has weighed on coffee prices after the real tumbled to a record low against the dollar Thursday of 5.0258 reals/USD. A weaker real encourages export selling by Brazil’s coffee producers. Another negative factor for coffee prices was the action by the International Coffee Organization (ICO) on Mar 3 to reduce its global 2019/20 coffee deficit forecast to -476,000 bags from a Jan projection of -626,000 bags.
May cocoa prices on Friday fell to a 2-1/2 month low and finished the week down -5.31%. A rally in the dollar index to a 2-week high Friday pressured cocoa prices, as did concern that the global spread of the coronavirus will curb demand for commodities, including cocoa. Cocoa prices were already under pressure on news of ample supply from the Ivory Coast, the world’s biggest producer. The Ivory Coast government on Monday reported that Ivory Coast farmers on a cumulative basis sent 1.68 MMT of cocoa to ports during Oct 1-Mar 8, up +8.4% y/y. A negative factor for cocoa is recent rain in West Africa. Monday’s data from the U.S. Climate Prediction Center showed above-average rainfall during Mar 1-7 across most of West Africa. Another bearish factor was the International Cocoa Organization’s (ICO) forecast Mar 6 that the global 2019/20 cocoa deficit will narrow to -85,000 MT from -107,000 MT in 2018/19. A negative factor is the sharp recovery in cocoa inventories in storage. ICE-monitored cocoa inventories recovered to a 5-1/2 month high of 3.831 mln bags on Friday from December’s 3-year low of 2.688 million bags.
May cotton on Friday slid to 6-1/2 month nearest-futures low and finished the week down by -3.66%. Cotton prices were under pressure over this past week after the World Health Organization (WHO) confirmed the coronavirus had expanded into a global pandemic. Also, the USDA in Tuesday’s monthly WASDE report raised its global 2019/20 cotton ending stocks estimate to 83.40 mln bales, more than expectations of 82.47 mln bales as they cut their global cotton consumption estimate to 118.16 mln bales, a bigger cut than expectations of 118.88 mln bales. 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. On the positive side, the USDA on Tuesday unexpectedly cut its U.S. 2019/20 cotton production estimate to 19.8 mln bales, when expectations were for an increase to 20.13 mln bales. The USDA also unexpectedly cut its U.S. 2019/20 cotton ending stocks estimate to 5.1 mln bales, less than expectations of no change at 5.4 mln bales. Also, foreign demand for U.S. cotton has improved after the USDA on Thursday reported U.S. upland cotton sales the week of March 5 rose +22% w/w to 484,200 running bales, the most in 13-months. Chinese cotton production has declined as 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. On Mar 2 the USDA’s FAS projected India 2019/20 cotton acreage would climb +5.6% y/y % to a record 13.3 million hectares.