Softs this week settled mixed:Â SBH0 -0.23 (-1.70%), KCH0 -6.15 (-4.64%), CCH0 +22 (+0.88%), CTH0 +0.28 (+0.41%).Â
Mar sugar on Friday closed higher but still finished the week down -1.70%. Mar sugar fell to a 4-week low Thursday on signs that India sugar crushing is picking up its pace. India’s Sugar Mills Association reported Thursday that India Oct-Dec sugar production was down -30% y/y to 7.8 MMT, which was an improvement from last month’s data that showed Oct-Nov sugar production fell -54% y/y to 1.89 MMT. Another negative for sugar was weakness in the Brazilian real which fell -0.68% Friday to a 1-week low against the dollar. A weaker real encourages export selling from Brazil’s sugar producers. Sugar prices found support after crude prices surged to an 8-month high Friday when the U.S. launched a drone attack Thursday night in Baghdad that killed a top Iranian general, which prompted Iran’s Supreme Leader Ayatollah Ali Khamenei to threaten “severe retaliation” for the attack. The surge in crude prices benefits ethanol prices and may encourage Brazil’s sugar mills to divert more cane crushing to ethanol production rather than sugar production, thus curbing sugar supplies.
Mar arabica coffee on Friday fell to a 1-week low and finished the week down by -4.64%. Arabica coffee was under pressure Friday on weakness in the Brazilian real which fell -0.67% to a 1-week low against the dollar. A weaker real encourages export selling by Brazil’s coffee producers. Brazil’s Trade Ministry on Thursday reported Brazil Dec coffee exports dropped -22.9% y/y to 3.162 mln bags, although for all of 2019 Brazil shipped a record 36.2 mln bags of coffee. Arabica coffee rallied to a 2-week high Tuesday after Cepea projected Brazil 2020/21 coffee production will come in “slightly” more than 60 mln bags, below the record of 62 mln bags seen in 2018/19 and well below September’s projection of 70 mln bags, as unfavorable weather conditions through mid-Oct 2019 reduced estimates. A bullish factor for arabica coffee is below-normal precipitation in Brazil after Somar Meteorologia on Monday said that rainfall in Minas Gerais, Brazil’s largest arabica-coffee growing region, measured only 30.9 mm in the past week, or only 52% of the historical average. The limited rainfall may curb arabica coffee yields in Brazil, the world’s largest arabica-coffee producer. Â
Mar cocoa prices on Friday pushed up to a 2-1/2 week high and finished the week up +0.88%. Cocoa prices rallied on tighter supplies as ICE-monitored cocoa inventories have trended lower over the past six months and posted a 3-year low of 2.688 million bags last Thursday. Another supportive factor for cocoa prices is the start of seasonal Harmattan winds that have reduced beneficial rain in West Africa and may curb Ivory Coast and Ghana cocoa yields. Satellite imagery from the U.S. Climate Prediction Center for Dec 23-29 showed little or no rainfall across most of the Ivory Coast and Ghana. Gains in cocoa were limited this week on signs of abundant supplies.  Data from the Ivory Coast government Friday showed Ivory Coast farmers sent 1.1 MMT of cocoa to ports Oct-Dec, up +2.8% y/y. Cocoa prices were also weighed down on ample cocoa supplies from Ghana, the world’s second-largest cocoa producer. Thursday’s data showed that the Ghana Cocoa Board purchased 456,701 MT of cocoa from farmers during Oct 1- Dec 19, up +11.3% y/y.Â
Mar cotton on Friday closed lower but still finished the week up +0.41%. Mar cotton rallied to a 7-month high Thursday on tighter U.S. supplies. ICE cotton inventories have fallen sharply over the past month and fell to a 2-year low Friday of 9,038 bales. Cotton also has support on speculation the recent phase-one trade deal between the U.S. and China will lead to increased Chinese demand for U.S. cotton. Chinese cotton production has declined after China’s National Bureau of Statistics reported Dec 16 that China 2019 cotton production fell -3.5% y/y to a 2-year low of 5.89 MMT. Cotlook on Dec 20 cut its global 2019/20 cotton surplus estimate to 389,000 MT from a Nov forecast of 636,000 MT. The Dec 10 WASDE report was supportive for cotton as the USDA cut its U.S. 2019/20 cotton production estimate to 20.21 mln bales, lower than expectations of 20.59 mln bales. The USDA also cut its U.S. 2019/20 cotton ending stocks estimate to 5.5 mln bales, below expectations of 6.01 mln bales, but still a 12-year high. The USDA also cut its global 2019/20 cotton ending stocks estimate to 80.32 mln bales, below expectations of 80.62 mln bales. USDA data shows the share of U.S. cotton of China imports fell to 18% in 2018/19 from 45% in 2017/18, well below the 30% share seen over the previous 5 years. The USDA estimates China 2019/20 cotton ending stocks will fall to 7.238 ln bales, an 8-year low.