CRB - Commodity Research Bureau - CRB - Fri May 18, 6:30AM CDT

Softs this morning are higher with Jul sugar +0.05 (+0.43%), Jul coffee +0.35 (+0.30%), Jul cocoa +13 (+0.49%), and Jul cotton +0.77 (+0.91%). Softs on Thursday settled mixed: Jul sugar -0.05 (-0.43%), Jul coffee +0.60 (+0.51%), Jul cocoa -91 (-3.33%), Jul cotton +0.68 (+0.81%). Jul sugar on Thursday climbed to a 1-1/2 week high but fell back and closed lower on weakness in the Brazilian real, which slumped to a 2-year low against the dollar and may encourage Brazil's sugar producers to boost more-profitable exports with the weaker real. Jul sugar had posted that 1-1/2 week high on positive carry-over from the rally in crude prices to a 3-1/2 year high, which may prompt Brazil's sugar producers to divert more sugar toward ethanol production and reduce sugar supplies. Jul sugar last Friday fell to a 2-week low on signs of robust global sugar supplies. 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. Jul sugar has moved lower over the past 2-months to a contract low and 2-1/2 year nearest-futures (K18) low Apr 25 as signs of abundant supplies fueled fund selling. Researcher Green Pool raised its global 2017/18 sugar surplus to an all-time high of 18.4 MMT and forecast a global 2018/19 sugar surplus of 6.6 MMT. Unica reported Brazil's Center-South sugar output in the second half of Apr jumped 34.8% y/y to 1.527 MMT. Also, India's SMA boosted its estimate for India's 2017/18 sugar production to a record 31.5 MMT from a Mar forecast of 29.5 MMT. 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. 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.

Jul coffee on Wednesday closed higher as prices consolidated recent losses. Jul coffee on Tuesday dropped to a 3-week low after the Brazilian real slumped to a 2-year low against the dollar, which gives coffee producers incentive to boost more-profitable exports with the weak real. Coffee prices have sold-off over the past week on robust supplies. Researcher Olam forecasts a global 2018/19 arabica coffee bean surplus of +6.1 mln bags following a -4.1 mln bag deficit in 2017/18. Also, Columbia, the world's second-largest arabica producer, reported its Apr coffee exports rose +3% y/y to 920,922 bags, and ICE-monitored coffee inventories rose to a 3-1/2 month high Monday of 1.999 mln bags and are just below Jan's 2-1/4 year high of 2.017 mln bags. The downside may be limited on Brazil crop concerns after Somar Meteorologia said Monday that rainfall in Minas Gerais, Brazil's biggest arabica coffee producing region, measured only 12% of its historical average over the past week. Coffee prices had fallen to a contract low and 10-1/2 month nearest-futures low (K18) on Apr 17 as the outlook for abundant coffee supplies fueled fund selling of coffee futures. 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. Also, Vietnam said it expects its 2018 coffee exports to rise +9% y/y to 1.55 MMT. ICO projects global 2017/18 coffee production will climb +0.8% y/y to a record 158.93 mln bags. On the positive side, the USDA projects that global 2017/18 coffee ending stocks will fall -8.6% to a 5-year low of 29.3 mln bags, and U.S. Apr green coffee inventories fell -2.3% y/y to 6.733 mln bags. ICO reported global coffee exports from Oct-Mar were 59.96 mln bags, down -0.6% y/y.

Jul cocoa prices on Thursday fell to a new 1-month low after weather forecasts called for normal to above-normal rainfall in the Ivory Coast higher over the next week. Supplies have tightened as Ivory Coast farmers delivered 1.601 MMT of cocoa beans to Ivory Coast ports during Oct 1-May 13, down -2.3% y/y. The recent rally in cocoa prices may be crimping global demand after Barry Callebaut, the world's top cocoa processor, reported last Wednesday that global chocolate sales rose +2.0% y/y in the three months through Jan, the slowest pace of increase in a year. Jul cocoa posted a contract and 1-1/2 year nearest-futures (K18) high Apr 26 on signs of stronger global cocoa demand amid tighter supplies. European Q1 cocoa processing rose +5.5% to 358,432 MT, more than expectations of +3.4% and the most for a Q1 in data going back to 2001, and Asian Q1 cocoa processing rose +7.2% y/y to 190,244 MT, stronger than expectations of +6.2% y/y. Cocoa purchases from the Cocoa Bard of Ghana, the world's second-biggest cocoa producer, have fallen -8.3% y/y to 688,092 MT from Oct 13-Apr 26. Cocoa prices have rallied sharply this year on dry weather in the Ivory Coast, which has received less than 75% of normal rainfall over the past month, according to Speedwell Weather. ICCO projects that 2017/18 global cocoa production will fall -2.3% y/y to 4.638 MMT and that the global cocoa surplus will fall to +105,000 MT from 2016/17's 6-year high surplus of 300,000 MT. On the negative side, the National Confectioners Association reported Apr 20 that Q1 North American cocoa processing unexpectedly fell -1.1% y/y to 120.152 MT, weaker than expectations of a +1.5% y/y increase.

Jul cotton on Thursday closed higher after data from the U.S. Drought Monitor showed 42% of Texas was in a severe-to-extreme drought as of May 15, up +2 pts w/w. Jul cotton on Tuesday posted a 2-week low as the pace of U.S. cotton planting picked up after Monday's USDA Crop Progress report showed 36% of the U.S. cotton crop planted as of May 13, ahead of the 5-year avg of 31%. Cotton prices rallied to a contract high last Monday after forecasted rains missed most of the Texas cotton growing areas. World Weather had forecast drier-than-normal conditions into May for West Texas, the biggest U.S. cotton producing state. Other positives include (1) USDA projections for U.S. 2018/19 cotton production of 19.5 mln bales, below expectations of 20.3 mln bales, and (2) USDA projections for global 2018/19 cotton ending stocks at a 7-year low of 83.75 mln bales, below expectations of 85.2 mln bales. On the bearish side, the U.S. Drought Monitor on Thursday reported that 33% of Texas was in a severe-to-extreme drought as of May 8, down from 44% three months earlier. Also, Chinese cotton demand has weakened with China Jan-Mar cotton imports down -8.3% y/y at 343.7 MT. Another negative is increased cotton output in India, the world's second largest cotton producer. 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 125.44 mln bales. Cotton prices on Apr 4 plunged to a 2-1/2 month low on the Chinese proposal to slap 25% tariffs on U.S. cotton exports.