Softs last week settled mixed:Â SBN0 -0.72 (-6.84%), KCK0 -10.85 (-9.35%), CCN0 -45 (-1.90%), CTK0 +2.160 (+4.09%).Â
July sugar on Friday sank to a new contract low and finished the week down -6.84%. Sugar prices retreated over the past week with the nearest-futures May contract falling to a 11-3/4 year low on Tuesday. Ample global sugar supplies, weak crude and a plunge in the Brazilian real all weighed on sugar prices. Brazil’s national crop agency, Conab, on Thursday issued its final estimate and said Brazil 2019/20 sugar production rose +2.6% y/y to 29.8 MMT. Fund selling of sugar futures picked up Friday after the Brazilian real plummeted against the dollar. The real on Friday plunged by -3.37% against the dollar and posted a new record low of 5.7456 reals/USD. A weaker real is bearish for sugar since it encourages export selling by Brazil’s sugar producers. The plunge in crude oil prices this week to an all-time low is another bearish factor for sugar as the weak crude undercuts ethanol prices and may prompt Brazil’s sugar mills to divert more cane crushing toward sugar production and away from ethanol production, thus boosting sugar supplies. Sugar prices continue to be undercut by concern about weaker sugar demand due to the coronavirus pandemic. Researcher Czarnikow on Mar 24 cut its global sugar consumption estimate for this year by -2.0 MMT, citing a collapse in out-of-home food and drink consumption due to the closure of restaurants because of the coronavirus pandemic. A large short position by funds could provide fuel for a short-covering rally in NY sugar futures. Friday’s weekly Commitment of Traders (COT) report showed that funds boosted their net-short NY sugar positions by +24,422 contracts in the week ended Apr 21 to a 20-week high of 65,138 contracts.
May arabica coffee on Friday sold-off to a 5-week low and finished the week down -9.35%. Coffee prices were on the defensive this week on concern that the pandemic-induced slump in the global economy will reduce coffee demand. Comexim Ltd on Wednesday said they expect no growth in global coffee demand this year and that there will be a 2020/21 global coffee surplus of 8 mln bags. A report from ICO on April 8 said that a 1 percentage point drop in GDP growth for the top-20 coffee-consuming countries (representing 71% of global coffee demand during 1990-2018) would reduce global coffee demand by 0.95% or 1.6 mln bags. Fund selling in arabica coffee futures intensified Friday as the Brazilian real plunged against the dollar. The real on Friday slumped by -3.37% and posted a new record low of 5.7456 reals/USD. A weaker real encourages export selling by Brazil’s coffee producers. Dry weather in Brazil is beneficial for the country’s coffee harvest and also weighed on coffee prices. Somar Meteorologia on Monday said that rainfall in Minas Gerais, Brazil’s largest arabica coffee-growing region, was 10.4 mm over the past week, or 60% of the historical average. A positive factor for coffee is dwindling U.S. coffee inventories after ICE-monitored coffee inventories on Thursday fell to a 2-1/2 year low of 1.864 mln bags.
July cocoa prices on Friday closed lower and finished the week down -1.90%. Cocoa prices on Friday closed lower for a second day on demand concerns. With large segments of the world under stay-at-home orders from the pandemic, there is concern that chocolate demand will suffer as cash-strapped consumers stay away from stores and limit their discretionary spending. Cocoa prices rallied earlier this week as Jul cocoa on Wednesday posted a 2-week high. Cocoa prices climbed on stronger-than-expected European cocoa demand after the European Cocoa Association on Wednesday reported that European Q1 cocoa processing unexpectedly rose +0.9% y/y to 373,625 MT, stronger than expectations for a -3.0% y/y decline and a record high for a first-quarter (data since 2003). However, cocoa demand was weak in North America and Asia. The Apr 17 data from the Cocoa Association of Asia showed that Asian Q1 cocoa grindings fell by -0.5% y/y to 207,356 MT. The National Confectioners Association on Monday reported that North American Q1 cocoa grindings fell -5.1% y/y to 115,591 MT. In a bearish factor, cocoa inventories in storage have recovered sharply. ICE-monitored cocoa inventories rebounded to an 8-1/4 month high of 4.168 mln bags on Thursday from December’s 3-year low of 2.688 million bags. In a supportive factor, the Ghana Cocoa Board reported on Monday that it purchased 692,840 MT of cocoa from farmers during Oct 1-Apr 2, down -0.8% from the same time last year. Also, the Ghana Cocoa Board on Monday cut its Ghana 2019/20 cocoa crop estimate to a 4-year low of 780,000 MT, down slightly from an October estimate of 800,000 MT. The Ivory Coast government on Monday reported that Ivory Coast farmers sent 22,602 MT of cocoa to ports during April 13-19, down -43.3% from a year earlier. However, longer-term deliveries are bearish with Ivory Coast cocoa farmers delivering 1.848 MMT of cocoa during Oct 1-Apr 19, up +2.7% y/y.
May cotton on Friday closed lower but still finished the week up +4.09%. May cotton rallied to a 5-week high Thursday amid speculation Chinese buying of U.S. cotton will increase as it reopens its textile mills that were shuttered over he past 2 months from the lockdown of large parts of China from the coronavirus pandemic. May cotton slumped to an 11-year nearest-futures low Apr 1 after the International Advisory Cotton Committee said with millions of people in Asia in self-isolation, the cotton and textile business is at a virtual standstill. Also, the USDA on the Apr 10 WASDE report raised its U.S. 2019/20 cotton ending stocks estimate to a 12-year high of 6.70 mln bales, more than expectations of 5.56 mln bales as the USDA cut its U.S. 2019/20 cotton export estimate to a 3-year low of 15.0 mln bales, less than expectations of 16.0 mln bales. The USDA also raised its global 2019/20 cotton ending stocks estimate to a 4-year high of 91.26 mln bales, more than expectations of 87.72 mln bales as they cut their 2019/20 global cotton consumption estimate to a 6-year low of 110.58 mln bales, below expectations of 113.70 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. 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.