Softs this week settled mixed:Â SBN0 +1.16 (+11.82%), KCN0 -0.65 (-0.61%), CCN0 +79 (+3.40%), CTN0 +0.21 (+0.38%).Â
July sugar on Friday rallied to a 1-month high and finished the week up sharply by +11.82%. Jul sugar recovered from a contract low Tuesday and rallied sharply on strength in crude and smaller sugar output from India. Crude prices rallied to a 1-1/2 week high Friday, which benefits ethanol prices and may prompt Brazil’s sugar mills to divert more cane crushing toward ethanol production rather than sugar production, thus curbing sugar supplies. Sugar prices also saw support from smaller sugar production from India, the world’s second-largest sugar producer, after the Indian Sugar Mills Association (ISMA) reported on Friday that India Oct-Apr sugar output fell -20% y/y to 25.8 MMT. A large short position by funds could provide fuel for a short-covering rally in NY sugar futures. Last Friday’s weekly Commitment of Traders (COT) report showed that funds boosted their net-short NY sugar positions by +17,188 contracts in the week ended Apr 28 to a 5-month high of 82,326 contracts. A negative for sugar prices was the 2.3 MMT delivery of sugar with Thursday’s expiration of the May NY ICE sugar futures contract, the biggest delivery on record. Large deliveries signal sellers couldn’t get better prices in the physical market. Persistent weakness in the Brazilian real against the dollar is negative for sugar prices with the real modestly above the record low of 5.7456 reals/USD from Apr 24. The weaker real is bearish for sugar since it encourages export selling by Brazil’s sugar producers. Sugar prices were undercut on Tuesday, with NY sugar falling to a contract low and nearest-futures May plummeting to a 12-1/2 year low, after JOB Economia e Planejamento said Brazil Center-South sugar production will jump +40% y/y to a record 37.5 MMT as the collapse in fuel prices spurs sugar millers to divert output away from ethanol production and towards sugar. 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. Weak ethanol demand is negative for sugar prices after Unica reported Wednesday that Brazil sugarcane-based ethanol sales the first half of April tumbled -32% y/y to 800 mln liters. Ample global sugar supplies are weighing on prices. Data on Wednesday from Unica showed Brazil Center-South 2020/21 sugar production in the first half of April up +178.8% y/y to 948 MMT as millers used 39.69% of sugar cane for sugar production, up from 23.49% the same time last year.
July arabica coffee on Friday closed lower and finished the week down -0.61%. Jul arabica coffee posted a 1-1/2 month low Thursday on weakness in the Brazilian real against the dollar and on beneficial weather in Brazil. Persistent weakness in the Brazilian real against the dollar is a major negative factor for coffee prices. The Brazilian real is modestly above the record low of 5.7456 reals/USD from Apr 24. A weaker real is bearish for coffee since it encourages export selling by Brazil’s coffee producers. Dry weather is favorable for harvesting with Somar Meteorologia reporting on Monday that rainfall in Minas Gerais, Brazil’s largest arabica coffee-growing region, was only 0.1 mm over the past week, or 1% of the historical average. Coffee prices remain under pressure on concern that the pandemic-induced slump in the global economy will reduce coffee demand. Brazilian coffee brokers are reporting that some international coffee buyers, mainly in Europe, are requesting that coffee shipments from Brazil be delayed up to 90 days as their coffee storage facilities are filled. A supportive factor for coffee is dwindling U.S. coffee inventories after ICE-monitored coffee inventories on Friday fell to a 2-1/2 year low of 1.82 mln bags.
July cocoa prices on Friday closed lower but still finished the week up +3.40%. Cocoa prices on Friday closed lower after ICE Futures cut its position limits on spot month July futures to 650 contracts from 1,000 contracts starting May 15. In another bearish factor, cocoa inventories in storage have recovered sharply. ICE-monitored cocoa inventories rebounded to a 9-1/2 month high of 4.346 mln bags on Friday from December’s 3-1/4 year low of 2.688 million bags. Jul cocoa on Thursday rose to a 1-1/2 month high on strength in U.S. chocolate demand after Nielsen reported Tuesday that U.S. retail chocolate sales rose +5.7% y/y in the eight weeks to April 18. Cocoa prices also have support after the Ivory Coast government on Wednesday extended its state of emergency from the coronavirus outbreak to May 15, which may disrupt the delivery of cocoa supplies from farms to Ivory Coast ports. Cocoa prices saw support from news of reduced cocoa shipments from West Africa. The Ivory Coast government on Monday reported that Ivory Coast farmers sent 23,2872 MT of cocoa to ports during April 20-26, down -38.4% from a year earlier. However, longer-term deliveries are bearish with Ivory Coast cocoa farmers delivering 1.872 MMT of cocoa during Oct 1-Apr 26, up +1.7% y/y. Cocoa prices also saw support from reduced cocoa supplies from Ghana, the world’s second-biggest cocoa producer. The Ghana Cocoa Board reported on Monday that it purchased 695,402 MT of cocoa from farmers during Oct 1-Apr 9, down -1.4% from the same time last year.
July cotton on Friday closed lower but still finished the week up +0.38%. Jul cotton rallied to a 1-1/2 month high Thursday on a surge in Chinese demand for U.S. cotton after the USDA reported that China purchased 1,304 running bales of U.S. upland cotton the week ended Apr 23, the biggest purchase in almost 8 years. Cotton prices fell back Friday after Cotlook raised its global 2019/20 cotton surplus estimate to 3.6 MMT from a previous forecast of 2.82 MMT. Also, Rabobank projects global 2019/20 cotton demand may fall -11% y/y, a bigger decline than the USDA’s forecast of -8% y/y. In addition, DD Cotton, one of India’s biggest cotton exporters, estimates that a lack of cotton demand from textile makers who remain shuttered due to the coronavirus pandemic may push India’s 2019/20 cotton ending stocks up to 12 million bales, a 30-year high.   Nearest-futures 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 as the USDA cut its U.S. 2019/20 cotton export estimate to a 3-year low of 15.0 mln bales. The USDA also raised its global 2019/20 cotton ending stocks estimate to a 4-year high of 91.26 mln bales as they cut their 2019/20 global cotton consumption estimate to a 6-year low of 110.58 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.