Softs this week settled mixed: SBN0 -0.68 (-6.20%), KCN0 +5.55 (+5.23%), CCN0 -2 (-0.08%), CTN0 +0.43 (+0.77%). July sugar on Friday fell to a 1-week low and finished the week down by -6.20%.Â
Sugar prices were under pressure most of the week on Tuesday’s forecast from Conab, Brazil’s official government forecasting agency, that Brazil’s 2020/21 sugar production will climb +18.5% y/y to 35.3 MMT as millers divert more cane juice to produce sugar as the outlook for ethanol has been decimated by drop in consumption and prices. Conab projects Brazil’s mills will divert 42.4% of cane juice to produce sugar in 2020/21, up from 34.9% in 2019/20. Unica reported last Wednesday that Brazil sugarcane-based ethanol sales the first half of April tumbled -32% y/y to 800 mln liters. JPMorgan Chase on Monday forecasted a global 2020/21 sugar surplus of +2.8 MMT compared with a February forecast for a -4.8 MMT sugar deficit, citing widespread Covid-19 lockdowns and worsening ethanol demand. JPMorgan said, “a rapid adjustment in ethanol production economics will likely drive Brazil’s Center-South mills to all but maximize the sugar mix, amid sustained oil price weakness.” Persistent weakness in the Brazilian real against the dollar is a major bearish factor for sugar prices. The real plunged to a new record low of 5.8744 reals/USD on Thursday. The weaker real is bearish for sugar since it encourages export selling by Brazil’s sugar producers. Another negative for sugar is Tuesday’s projection from the USDA’s Foreign Agricultural Service (FAS) that EU 2020/21 sugar production will climb +2.5% y/y to 17.68 MMT.Â
July arabica coffee on Friday rallied to a 2-week high and finished the week up +5.23%. A +1.22% rally in the Brazilian real on Friday sparked fund short-covering in coffee prices. Coffee prices also have support on Wednesday’s news that Colombia’s Apr coffee exports fell -32% y/y to 592,000 bags. Colombia is the world’s second-largest producer of arabica beans. Another bullish factor for coffee was Somar Meteorologia’s forecast on Monday for rain and windy conditions for this week in Minas Gerais, Brazil’s largest arabica coffee-growing region, which may trigger coffee beans to fall off of trees and curb coffee output. Dwindling U.S. coffee inventories are also bullish for coffee prices after ICE-monitored coffee inventories on Wednesday fell to a 2-1/2 year low of 1.804 mln bags. On the negative side for coffee prices is concern that the pandemic-induced slump in the global economy will reduce coffee demand. Data on Thursday from IRI showed that U.S. sales of coffee at supermarkets fell -20% w/w in the four weeks ended April 19. The International Coffee Organization (ICO) on Tuesday forecast a global 2019/20 coffee surplus of +1.948 mln bags, illustrating a much easier supply situation compared with its March forecast for a -470,000 bag deficit.
July cocoa prices on Friday closed higher but still finished the week down -0.08%. Jul cocoa fell to a 1-week low Wednesday due to favorable weather conditions in West Africa. Abundant rain in West Africa should boost cocoa yields in the Ivory Coast and Ghana, the world’s two biggest cocoa producers. The U.S. Climate Prediction Center on Monday reported that there was above-average rainfall in West Africa during Apr 26-May 2. 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 May 1 from last December’s 3-1/4 year low of 2.688 million bags. Reduced cocoa shipments from West Africa are supportive for prices. The Ivory Coast government on Monday reported that Ivory Coast farmers sent 18,667 MT of cocoa to ports during April 27-May 3, down -42.9% from a year earlier. However, longer-term deliveries are bearish with Ivory Coast cocoa farmers delivering 1.89 MMT of cocoa during Oct 1-May 3, up +1.1% y/y. Also, the Ghana Cocoa Board reported Tuesday that Ghana cocoa purchases from Oct 1- Apr 16 were 698,493 MT, down -0.9% y/y. The Ghana Cocoa Board last 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.
July cotton on Friday rose to a 1-week high and finished the week up +0.77%. An easing of trade tensions with China sparked optimism that China will boost its purchases of U.S. cotton after China’s Ministry of Commerce on Friday said that China’s Vice Premier Liu He talked with U.S. Trade Representative Lighthizer and Treasury Secretary Mnuchin and “both sides agreed that good progress is being made on creating the governmental infrastructures necessary to make the agreement a success. Jul cotton had dropped to a 2-week low Wednesday on concern weak cotton demand will boost global supplies after Cotlook on May 1 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.