Tight Global Sugar Supplies

SUGAR

March sugar extended last week’s selloff overnight but bounced off the 200-day moving average, which could be a key support level today, as a close below there could convince tech traders that a long-term downtrend is in place. Global supplies have been tight, but it appears that Brazil’s large production is starting to make it to market after the port congestion earlier this season. Brazil’s exported 3.685 million tonnes of sugar in November, up from 3.345 million for the same period last year, a gain of 10.2%. The recent bi-weekly report from UNICA showed Brazilian Center-South sugar production was running 31% ahead of a year ago as of November 16. Ukrainian sugar exports to the EU were 10 times higher in 2022/23 than the previous year, and there are reports that the trend has continued into 2023/24, which suggests that Brazil is in danger of losing it dominant position in that market. However, sugar from Brazil did receive the largest share of reallocated US low tariff sugar imports recently.

COCOA

The cocoa market saw a brief selloff in the wake of the International Cocoa Organization’s quarterly update last week, and recent fund selling into a rally may be a concern for the bulls, but the trend is still up, and selling into the uptrend poses heavy risk. In its update last week, the ICCO narrowed its projected global production deficit for 2022/23 to 99,000 tonnes from its previous forecast of 117,000. This would still be the second straight year with a global deficit. The trade expects a third deficit for 2023/24 given the poor start to the west African main crop. ICCO is expected to release its first projection for 2023/24 sometime next quarter. It usually releases it in late February or early March. Ivory Coast cocoa arrivals totaled 67,000 tonnes for the week ending December 3, down from 120,000 for the same period last year. Total arrivals for the marketing year, which began on October 1, have reached 548,000 tonnes, down 35% from the same period last year. Last week’s decline in the euro may have put some additional pressure on cocoa prices because the weaker currency makes it more expensive for European grinders.

COFFEE

March coffee traded in a narrow range overnight following Friday’s selloff, which came after it reached a 5 1/2-month high earlier in the session. Last week’s rally was fueled in part by steep declines in ICE exchange stocks. Stocks were unchanged on Friday and remained at a 24 1/2 month low, but this followed a 69,000-bag decline on Wednesday and Thursday. ICE has changed its delivery rules to no longer allow older coffee that has been removed from warehouses to be resubmitted for grading. The new rule went into effect on December 1, and there was an exodus of stocks ahead of the deadline. Despite concerns about the weather (with recent storms coming on top of periods of extreme hear affecting the flowering period), many analysts expect Brazil’s 2024/25 Arabica crop to show an increase from 2023/24. A cold front was expected to bring much needed rain to the region over the weekend.  Dealers said the climate in Vietnam has been favorable to harvesting, with cooler temps and no rain. Vietnam is the world’s largest robusta exporter.

COTTON

The cotton market seems to need a bullish demand catalyst to resume its uptrend, and lacking that, it could go back to test the November lows. The next update for the US crop will come in the USDA Crop Production and supply/demand reports this Friday, and the market may consolidate into the report. Traders continue to fret about global demand. The US weekly export sales report on Thursday showed net sales of 233,062 bales of cotton for the week ending November 23 (2023/24 and 2024/25 crops combined), which was the lowest in five weeks but still respectable.

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