CRB - Commodity Research Bureau - CRB - Fri Aug 10, 6:33AM CDT

Softs this morning are mixed. Oct sugar -0.17 (-1.57%), Sep coffee -0.60 (-0.56%), Sep cocoa +6 (+0.29%), and Dec cotton +0.33 (+0.38%). Softs on Thursday settled mixed: Oct sugar +0.03 (+0.28%), Sep coffee -0.20 (-0.19%), Sep cocoa -30 (-1.42%), Dec cotton +0.08 (+0.89%). Oct sugar on Thursday closed higher after Unica reported Brazil's Center-South 2018/19 sugar output through July was 14.753 MMT, down -16.3% y/y, with the amount of sugar converted to ethanol at 16.054 mln liters, up +38% y/y. Oct sugar on Monday rose to a 1-week high on fund short covering after Skymet Weather Services forecast India's monsoon rains this year will be only 92% of average, which may curb Indian sugar crop yields. Sugar price have been hammered over the past 5-weeks and posted a new 3-year nearest-futures low last Thursday as signs of abundant global sugar supplies have fueled fund selling. The USDA's Foreign Agricultural Service (FAS) projects a record 2017/18 global sugar surplus of 10.73 MMT and record global 2017/18 sugar production of 184.95 MMT. The Indian Sugar Mills Association (SMA) projects 2018/19 sugar production in India, the world's second-largest sugar producer, will climb 10% to a record 35.5 MMT and the SMA also asked the government to increase India's 2018/19 sugar export quotas to a record 6 MMT. The Thailand Office of Cane and Sugar Board reported Thailand 2017/18 sugar production rose to a record 14.47 MMT, while the ISO raised its global 2017/18 sugar surplus estimate to +11.1 MMT from a Mar estimate of +5.15 MMT and projected a global 2018/19 sugar surplus in excess of 4 MMT. On the positive side, Conab projects Brazil 2018/19 sugar production will fall -6.3% y/y to 35.5 MMT, a 3-year low.

Sep coffee on Thursday closed lower after the Brazilian real fell to a 3-week low against the dollar, which provides incentive for Brazil's coffee producers to boost more-profitable exports with the weak real. Also, ICE-monitored coffee inventories climbed to a 2-3/4 year high of 2.073 mln bags Wednesday, a sign of robust supplies. Sep coffee last Thursday fell to a contract low as signs of ample global supplies fueled fund selling of coffee futures. Cooxupe recently raised its Brazil 2018/10 arabica coffee crop estimate to 42 mln to 44 mln bags from a Feb estimate of 40 mln to 42 mln bags. Also, ICO data shows global coffee exports from Oct-Jun were 90.9 mln bags, up +0.3% y/y. Nearest-futures (N18) coffee on Jul 6 plunged to a 4-1/2 year low on the prospects for abundant supplies. The USDA on Jun 15 projected global 2018/19 coffee production will climb +7.1% y/y to a record 171.166 mln bags and global 2018/19 coffee ending stocks will increase by +11.6% to a 3-year high of 32.812 mln bags. Also, coffee production from Columbia, the second-largest arabica-bean producer, rose +3.6% y/y in Jun to 1.087 mln bags. Conab projects Brazil 2018 coffee production of 58 mln bags, up +29% y/y, as crops are in the higher-yielding half of their biennial cycle. On the positive side, the USDA projects that global 2018/19 coffee consumption will climb +2.9% to a record 163.219 mln bags. Also, U.S. Jun green coffee inventories fell -6.2% y/y to 6.84 mln bags. In addition, ICO raised its global 2017/18 coffee deficit estimate to -1.4 mln bags from a previous estimate of -254,000 bags.

Sep cocoa prices on Thursday closed lower but stayed above Monday's 5-3/4 month low. Cocoa prices have trended lower over the past 3-weeks to a 5-3/4 month low Monday on signs of ample supplies amid mixed demand. Q2 North American cocoa processing data released Jul 20 showed an unexpected decline of -3.1% y/y to 119,301 MT, weaker than expectations for a +0.3% y/y gain. Demand concerns remain after Barry Callebaut, the world’s biggest cocoa processor, warned that high cocoa prices will curb global cocoa demand in Q3. On the positive side, Ivory Coast farmers delivered 1.911 MMT of cocoa beans to Ivory Coast ports during Oct 1-Aug 5, down -0.3% y/y. Also, Q2 Asia cocoa grindings rose +15.2% y/y to 185,394 MT, much stronger than expectations of +8.3% y/y, and European Q2 cocoa processing rose +7.3% to 356,109 MT, more than expectations of +2.5% y/y and a record high for a Q2 in data going back to 2001. Purchases of cocoa from the Cocoa Bard of Ghana, the world's second-biggest cocoa producer, fell by -6.7% y/y to 848,710 MT during Oct 13-Jul 19. Cocoa prices rallied to a 1-3/4 year high in May on signs of stronger global demand along with concern excessive dry conditions in West Africa would reduce Ivory Coast and Ghana cocoa yields. ICCO projects that 2017/18 global cocoa production will fall -3.4% y/y to 4.587 MMT and that the global cocoa surplus will fall to +10,000 MT from 2016/17's 6-year high surplus of 300,000 MT.

Dec cotton on Thursday closed higher as drought conditions worsened in Texas, the biggest U.S. cotton-producing state, after data from the U.S. Drought Monitor showed that 65% of Texas was in a severe-to-extreme drought as of Aug 7, up +21 points w/w. Gains were limited on concern escalation of China/U.S. trade tensions will reduce Chinese demand for U.S. cotton after the U.S. said it will impose a 25% tariff on an additional $16 billion of Chinese goods starting Aug 23 and China said it will retaliate by imposing tariffs on $16 billion of U.S. goods. Also pressuring cotton prices are weather forecasts that call for rains almost daily for most of West Texas through Aug 14, which should boost the condition of U.S. cotton crops. Dec cotton last Wednesday rallied to a 1-1/2 month high after Cotlook hiked its global 2018/19 cotton deficit estimate to 1.05 MMT from a previous forecast of 717,000 MT. China Jan-Jun cotton imports were up +6.4% y/y at 680,000 MT, although trade tensions between U.S. and China may curb China's demand for U.S. cotton going forward. A negative factor is increased cotton output in India, the world's second largest cotton producer, as India projects its 2017/18 cotton production will climb +9.8% y/y to a 3-year high of 37 mln bales. Cotton demand is a major supportive factor as the USDA projects that global 2018/19 cotton use will climb to a record high of 126.95 mln bales. Monday’s USDA Crop Progress report showed that 40% of the U.S. cotton crop was in good-to-excellent condition as of Aug 5, down -3 points w/w and well behind the 57% from the same time last year and the worst condition for this time of year since 2009.