Softs last week settled higher:Â SBK0 +0.12 (+1.16%), KCK0 +3.70 (+3.22%), CCK0 +41 (+1.81%), CTK0 +3.39 (+6.65%).Â
May sugar on Thursday closed higher and finished the week up +1.16%. May sugar is consolidating just above the 1-1/2 year low from Apr 1. 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. Also, Commerzbank on Thursday cut its NY sugar price estimate for Q4-2020 to 12 cents/lb from a Feb estimate of 15 cents/lb, citing the plunge in crude oil prices and the sell-off in the Brazilian real to a record low against the dollar. A slump in Brazil ethanol prices is also weighing on sugar. Brazil ethanol prices tumbled to a 2-1/2 year low last Friday of 1.3049 reals/liter. The slump in ethanol prices may force Brazil’s sugar mills to divert more cane crushing toward sugar production rather than ethanol production, thus boosting sugar supplies. The recent plunge in crude oil prices to an 18-year low is another major bearish factor for sugar prices. Weaker crude oil prices undercut ethanol prices and may prompt Brazil’s sugar mills to divert more cane crushing toward sugar production rather than ethanol production.  Another negative for sugar is the persistent weakness in the Brazilian real against the dollar. The real last Friday dropped to a record low of 5.3225 reals/USD, although it did recover to a 1-1/2 week high on Thursday. A weaker real is bearish for sugar since it encourages export selling by Brazil’s sugar producers.
May arabica coffee on Thursday rallied to a 1-1/2 week high and finished the week up +3.22%. Coffee prices have support on concern the coronavirus pandemic will disrupt coffee supplies from South America. Brazil’s Sao Paulo state began a 15-day quarantine Mar 24 and Colombia put its entire population on a 3-week lockdown. Coffee-trader Volcafe told clients that the coronavirus pandemic is causing logistical holdups that will become “more widespread” in major coffee-producing countries, which may delay coffee shipments to ports and other transport operations. Also, Rabobank last Monday said the expected peak of the coronavirus pandemic in Brazil is expected to coincide with Brazil’s coffee harvest, which may be problematic since most of the coffee harvest is done manually and many local workers and laborers may stay away or be quarantined because of the virus. Another bullish factor is heavy rain in Brazil that may delay the coffee harvest. Somar Meteorologia on Monday reported that rain in Minas Gerais, Brazil’s largest arabica coffee-growing region, measured 35.2 mm in the past week, or 141% of the historical average. Coffee prices were undercut on Thursday’s downbeat assessment from the International Coffee Organization (ICO) that global coffee consumption this year could stagnate or even decline compared with pre-pandemic growth forecast of 2%-3%. On the bullish side, ICO said coffee production and supply chains are likely to be “severely disrupted” as the coronavirus spreads through coffee-growing countries. Global coffee demand concerns continue as the global spread of the coronavirus pandemic has forced the shutdown of many restaurants, cafes, and bars around the world. Arabica coffee on Thursday saw support from strength in the Brazilian real, which rose +0.77% against the dollar to a 1-1/2 week high and has now moved higher against the dollar for four consecutive sessions. The real last Friday sank to a new record low of 5.3225 reals/USD. A stronger real discourages export selling by Brazil’s coffee producers.
May cocoa prices on Thursday closed lower but still finished the week up +1.81%. Cocoa prices on Thursday retreated on global demand concerns. The coronavirus pandemic has devastated chocolate sales for Easter, a typically strong time of year for consumer chocolate demand. Nielsen reported Thursday that chocolate confectionery sales in Britain dropped -21% in the week to March 28 from a year earlier. Also, J Gaines Consulting said U.S. Easter chocolate sales may fall “sharply” as shoppers buy fewer gifts and stay away from stores. Cocoa prices on Tuesday had climbed to a 3-week high on signs of stronger processing demand and shrinking cocoa shipments in West Africa. Gepex, a group of six of the world’s biggest cocoa grinders, reported on Tuesday that Q1 Gepex cocoa processing rose +5.6% y/y to 139,821 MT. News of reduced short-term cocoa shipments in West Africa is a supportive factor for cocoa. The Ivory Coast government on Monday reported that Ivory Coast farmers sent 32,263 MT of cocoa to ports during March 30-April 5, down -36.4% from a year earlier. However, cumulative deliveries are bearish with Ivory Coast cocoa farmers delivering a record 1.76 MMT of cocoa in its 2019/20 main crop (Oct-Mar), up +5.4% y/y. The Ghana Cocoa Board reported Thursday that it purchased 690,2650 MT of cocoa from farmers Oct 1-Mar 26, down -0.5% from the same time last year.Â
May cotton on Thursday rallied to a 2-week high and finished the week up +0.68%. May cotton rallied Friday after a fall in the dollar index to a 1-week low sparked short-covering in cotton futures. Cotton prices were under early pressure Friday on a bearish WASDE report where the USDA 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. 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. 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. 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.