Softs this week settled mixed:Â SBH0 +0.31 (+2.12%), KCH0 -4.30 (-4.19%), CCH0 +123 (+4.43%), CTH0 +0.25 (+0.37%).Â
Mar sugar on Friday settled slightly higher and finished the week up +2.12%. Sugar prices have rallied steadily over the past month with NY sugar posting a 2-year high Tuesday. India’s Sugar Trade Association (ISMA) on Monday reported that sugar production in India, the world’s second-largest sugar producer, dropped sharply by -24% y/y to 14.1 MMT during Oct 1-Jan 31. Also, sugar supplies from the EU are on the decline after the European Commission reported Monday that EU sugar exports during Oct 1-Jan 22 fell -62% y/y to a 3-year low of 291,000 MT. In addition, sugar prices found support on drought in Thailand, the world’s fourth-biggest sugar producer. The Thailand Meteorological Department says this year’s drought in Thailand is the worst in 40 years. The Thai Sugar Millers Corp said on Friday that Thailand 2019/20 sugar production may drop -35% y/y to 9 MMT from 14 MMT in 2018/19 as dry conditions reduce sugarcane yields. A negative for sugar was concern about increased Brazil sugar exports due to weakness in the Brazilian real. The real on Friday fell -0.75% and posted a new record low of 4.3225 reals/USD. The weaker real encourages export selling from Brazil’s sugar producers and is therefore bearish for sugar prices.
Mar arabica coffee on Friday closed higher but still finished the week down by -4.19%. Coffee prices have trended lower over the past seven weeks as arabica coffee posted a 3-1/2 month low Thursday on increased supplies and demand concerns. Marex on Tuesday projected that the global 2020/21 coffee market will swing to a surplus of +500,000 bags from a revised -3.2 mln bag deficit in 2019/20 (previously -4.7 mln bags). Arabica coffee is also under pressure on Monday’s news of beneficial weather in Brazil that should boost coffee yields and production. Somar Meteorologia reported on Monday that rainfall in Minas Gerais, Brazil’s largest arabica-coffee growing region, measured 43.6 mm in the past week, or 112% of the historical average. Another negative factor for arabica coffee is weakness in the Brazilian real. The real on Friday fell -0.75% against the dollar and posted a new record low of 4.3225 reals/USD. A weaker real encourages export selling by Brazil’s coffee producers. Demand concerns are also weighing on coffee prices due to the spread of the Chinese coronavirus. Starbucks said it has closed more than half of its stores in mainland China, about 2,000 stores, and McDonald’s has closed several hundred stores in China due to the virus, which is negative for coffee demand. A supportive factor for coffee prices was Monday’s news from the International Coffee Organization (ICO) that global 2019/20 coffee exports Oct-Dec fell -5.8% y/y to 29.012 mln bags.
Mar cocoa prices on Friday rallied to a 3-1/4 year nearest-futures high and finished the week up by +4.43%. Cocoa prices rallied sharply this week on dry conditions in West Africa along with signs of strong cocoa demand. The seasonal Harmattan winds in West Africa have started later than normal this year and have dried out cocoa fields in the Ivory Coast and Ghana. Satellite imagery on Monday from the U.S. Climate Prediction Center for Jan 27-Feb 2 showed almost no rainfall across most of the Ivory Coast and Ghana. A lack of rainfall in West Africa may reduce Ivory Coast and Ghana cocoa yields. Cocoa prices extended this week’s rally Friday on signs of strength in cocoa demand after Friday’s data from Gepex, a group of the six largest cocoa grinders, showed that Jan cocoa processing rose +3.3% y/y to 48,464 MT. On the negative side for cocoa prices is ample supply from the Ivory Coast, the world’s biggest cocoa producer. The Ivory Coast government on Monday reported that Ivory Coast farmers on a cumulative basis sent a total of 1.47 MMT of cocoa to ports during Oct 1-Feb 2, up +7.3% y/y. Â
Mar cotton on Friday closed higher and finished the week up by +0.37%. Cotton prices had dropped to a 1-1/2 month low Monday on concern the spread of the China coronavirus will derail the global economy and demand for cotton. China’s economy is seeing significant damage from the quarantining of large swaths of China’s population, large-scale business shutdowns, and extensions of the Lunar New Year holiday. Chinese cotton demand was already weak after China Dec cotton imports fell -29.8% y/y to 150 MT. Cotton prices rebounded from Monday’s 1-1/2 month low on optimism Chinese demand for U.S. cotton may improve after China on Thursday cut tariffs on $75 billion of U.S. goods. China’s Agriculture Ministry on Jan 10 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 on Dec 16 reported that China 2019 cotton production fell -3.5% y/y to a 2-year low of 5.89 MMT. Another bearish factor was Tuesday’s 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. The USDA estimates that Chinese 2019/20 cotton ending stocks will fall to an 8-year low of 7.238 ln bales, but that U.S. 2019/20 cotton ending stocks will rise to a 12-year high of 5.40 mln bales.