Softs last week settled mixed:Â SBH0 +0.76 (+5.71%), KCH0 -7.40 (-5.86%), CCH0 +70 (+2.18%), CTH0 +2.11 (+3.05%).Â
Mar sugar on Friday raced up to a 14-1/4 month high and finished the week up +5.71%. Sugar prices rallied after Citigroup raised its global 2019/20 sugar deficit estimate to -7.6 MMT from a previous estimate of -7.0 MMT as sugar crop risks persist in India and Thailand. Sugar prices added to their gains Friday after the USDA in Friday’s WASDE report cut its U.S. 2019/20 sugar production estimate to 8.158 MMT from a Dec estimate of 8.280 MMT. Sugar prices were already in a rally-mode after Paragon Global Markets on Thursday forecast that the 2019/20 global sugar deficit will reach -10 MMT, well above ISO’s estimate of -6.1 MMT, due to lower sugar production in Mexico, U.S., and Thailand. Sugar is also garnering support from expectations for China to boost its imports of ethanol. China’s National Development and Reform Commission plans to roll out a mandate to raise biofuel use this year. According to USDA data, China will need 18 MMT of ethanol a year, four times its current 4.2 MMT output, to mandate the use of E-10 (a 10% ethanol-gasoline mix) to satisfy its 3.6 million bpd gasoline requirement. Increased ethanol demand will encourage refiners to use more sugar cane for ethanol production, thus reducing sugar production and providing support for sugar prices.
Mar arabica coffee on Friday tumbled to 6-week low and finished the week down by -5.86%. Coffee prices were under pressure this week on the outlook for strong Brazil coffee production. Brazil’s Ecom Trading on Thursday forecast Brazil 2020/21 coffee production of 70 mln bags, up +22.8% y/y and well above the 56 mln-58 mln bags forecast for 2019/20 as beneficial weather boosts coffee development in Brazil’s higher-yielding half of its biennial cycle. Coffee prices are also under pressure from Wednesday’s projection from coffee exporter Comexim that Brail’s Q1 coffee exports will average 3 mln bags a month, above the 5-year average of 2.6 mln bags a month. In another bearish factor, the International Coffee Organization (ICO) on Wednesday raised its global 2019/20 coffee production estimate by +0.8% to 168.7 mln bags from a prior estimate of 167.4 mln bags. Also, ICO reported that global exports of arabica coffee in the 12 months through Nov totaled 83.2 mln bags, up +7.9% from a year earlier. On the bullish side, ICO raised its 2019/20 global coffee deficit estimate by 25% to -626,000 bags from a prior estimate of -502,000 bags.
Mar cocoa prices on Friday rallied to a 3-1/2 week high and finished the week up +2.18%. Fund buying pushed cocoa prices this week on concern that seasonal Harmattan winds in West Africa will lead to dry conditions that may curb Ivory Coast and Ghana cocoa yields. Satellite imagery on Monday from the U.S. Climate Prediction Center for Dec 29-Jan 4 showed little or no rainfall across most of the Ivory Coast and Ghana. Gains in cocoa accelerated Friday after the dollar index fell back from a 2-week high and moved lower, which sparked short-covering in cocoa futures. London cocoa on Monday fell to a 1-week low on data showing ample cocoa supplies. Cocoa supplies from the Ivory Coast, the world’s largest cocoa producer, are abundant after the Ivory Coast government reported Monday that Ivory Coast farmers sent 84,067 MT of cocoa to ports during Dec 30-Jan 5, up +20.7% y/y. Also, Ivory Coast farmers sent a cumulative total of 1.251 MMT of cocoa to ports during Oct 1-Jan 5, up +10.7% y/y. Cocoa prices were also undercut by the Ghana Cocoa Board’s report on Monday that it purchased 496,217 MT of cocoa from farmers during Oct 1- Dec 26, up +8.9% y/y. Â
Mar cotton on Friday rallied to an 8-month high and finished the week up +3.05%. Cotton prices found support on Friday’s WASDE report where the USDA cut its U.S. 2019/20 cotton ending stocks estimate to 5.40 mln bales, a bigger cut than expectations of 5.44 mln bales, but still a 12-year high. Also, the USDA cut its global 2019/20 cotton ending stocks estimate to 79.59 mln bales, below expectations of 80.20 mln bales. In addition, ICE cotton inventories have fallen sharply over the five weeks and fell to a 2-year low Friday of 6,824 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. China’s Agriculture Ministry on Friday raised its China 2019/20 cotton import estimate to 1.8 MMT from a prior forecast of 1.6 MMT due to improvement in US/China trade relations. 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. 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.