Fires Set to Sugar Cane Fields In Brazil

COCOA

December Cocoa was higher again overnight, as the market remained concerned about Ghana production this year in the face of ongoing dry conditions. Yesterday, Ghana announced it had temporarily banned the exports of grains, including maize, rice, and soybeans, to ensure adequate domestic supply, which only added to the concerns. Some of the eastern cocoa growing areas received decent rainfall over the past 24 hours, but most of the rain was concentrated in the north, missing the main cocoa growing areas. Ivory Coast famers are somewhat guarded after an intense wave of cool weather extended into a second week last week. Growers said there was no sign of damage on plantations from the cold. Rains were below average last week in most of Ivory Coast’s main cocoa regions, which could also be lending support to the market. Rains mixed with sun are needed in September and October to boost the main crop’s duration and size. Farmers interviewed by Reuters said harvesting has started slowly and would pick up in September and October as plenty of pods were ripening on trees. Ivory Coast port arrivals last week were estimated at 8,000 metric tons, down from 9,000 for the same period a year ago. Cumulative arrivals since the marketing year began last October have reached 1.696 million tons, down 26% from a year ago.

COFFEE

December NY Coffee reached a new contract high overnight, and the nearby contract traded to its highest level since September 2011. The market was supported by the London futures, which traded to new all-time highs after being closed for holiday yesterday. Tight global supplies of robusta coffee continue to support the market, but the fires in Brazil, which are affecting the sugar areas, underscore the extremely dry conditions present in the coffee growing areas there. There are forecasts for some rains but in very light volume. South Minas Gerais could get around 4 mm (0.16 inch). No rain was reported overnight. The drought has implications for next year’s crop, as Brazil’s harvest is all but complete. Vietnam’s robusta harvest typically begins in October. ICE arabica stocks decreased by 420 bags yesterday to 843,745 after reaching their highest in at least four months on Friday.

COTTON

December Cotton closed lower yesterday and extended its losses overnight, as a stronger dollar, weak grains grain markets, and rising tensions between the US and China undermined the support the market has recently. The dollar rallied yesterday on increased tensions in the Middle East, pushing aside pressure from expectations for the US Fed to cut a interest rates. This was after the dollar fell to its lowest level in over a year on Friday. The US imposed sanctions on Chinese companies US officials believe are helping Moscow skirt Western sanctions and build up its military. China was the largest buyer of US cotton in 2023/24. The weekly Crop Progress report showed 40% of the US cotton crop was rated good/excellent as of August 25, down from 42% the previous week. This is the lowest they have been so far this year, but it was still up from 33% a year ago. The five-year average for this date is 46%. Texas was 26% G/E, down from 29% last week but up from 12% a year ago. The five-year average is 32%. Mississippi was 53% G/E, down from 54% last week and 55% a year ago. The five-year average is 61%. The report also showed 25% of the US crop had bolls open, with Texas at 27% open, Arkansas 45%, and Mississippi 37%. No measurable rain fell in West Texas or Mississippi overnight.

SUGAR

October Sugar saw wide sweeping action overnight but was still higher on the day this morning. News of large fires in Brazil causing damage to sugar cane fields and ethanol infrastructure sparked short covering yesterday that took the market to its highest level in over a month. Four men have been arrested on suspicion of setting the fires. Brazil’s largest sugar group Raizen estimated that about 1.8 million tons of its sugarcane, including what it sources from suppliers, had been affected by the fires, which is about 2% of the total it expected for its 2024/25 crop. The burnt cane still be crushed, but it has to be done quickly before it starts losing its quality. Another firm, Sao Martinho, said 20,000 hectares of its sugarcane were impacted, which could result in a reduction of 110,000 tons of sugar. The fires could also affect the 2025 crop if some of the burnt areas included cane planted for next season. The rally may have gotten overdone on the fire news, but it does highlight the extremely dry conditions in the country that are expected to eventually pull production sugar down from last year. For the UNICA report expected to be released this week, a survey by S&P Global Commodities Insights has first-half August Center-South sugar production at 3.28 million metric tons, which would be down from 3.61 million in the second half of July and from 3.464 million a year ago. As of August 1, cumulative sugar production for 2024/25 was running 8% above a year ago.

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