Softs

Softs this morning are mixed with Mar sugar +0.02 (+0.13%), Dec coffee +0.20 (+0.16%), Dec cocoa -13 (-0.59%), and Dec cotton +0.34 (+0.49%). Softs on Monday settled mixed: Mar sugar +0.17 (+1.14%), Dec coffee +0.05 (+0.04%), Dec cocoa -15 (-0.67%), Dec cotton -0.17 (-0.25%). Mar sugar on Monday rallied to a 5-1/2 month nearest-futures high on signs that Brazil's sugar millers are diverting sugar supplies toward ethanol production as data from Unica showed the percentage of sugar cane used for ethanol was 57.15% in the second half of Oct versus 50.71% for the same time last year. The rally in crude oil prices last Monday to a 2-1/3 year high has prompting fund short-covering on speculation Brazil's sugar mills may divert more sugar supplies toward ethanol production with the higher crude and gasoline prices. Researcher Datagro last Tuesday forecast Brazil 2018/19 sugar production at 32.6 MMT, down -10.4% y/y from 36.4 MMT in 2017/18. Current supplies remain ample after Unica reported that sugar production in the crop year through Oct in Brazil's Center-South region was up +2.8% y/y at 33.102 MMT. Also, India projects that its 2017/18 sugar crop will increase by +23% y/y to 25 MMT, the first gain in 3 years. In addition, the Thai Sugar Millers Corp. predicted that 2017/18 Thailand sugar production may climb +10% y/y to 11 MMT, a 6-year high. ISO projects a global 2017/18 sugar surplus of 3 MMT, following the global 2016/17 deficit of -6.465 MMT.

Dec coffee prices on Monday closed higher but remained below Friday's 1-month high. Coffee rallied to that high on short-covering spurred on after Brazil reported Oct coffee exports fell -11.1% y/y to 2.644 mln bags, the fifth straight month Brazil's coffee exports have fallen year-over-year. Dec coffee fell to a 4-3/4 month nearest-futures low Nov 1 on robust supplies. ICO data shows Oct-Sep global coffee exports are up +4.8% y/y to 122.45 mln bags and ICE-monitored coffee inventories Nov 3 rose to a 2-year high of 1.926 million bags. Also, the ICO Tuesday revised up its global 2016/17 coffee ending stocks estimate to a surplus of 2.38 mln bags from a forecast last month for a deficit of -1.2 mln bags. That surplus would be the first in 3 years. The ICO also raised its global 2016/17 coffee production estimate to a record 157.44 mln bags from a prior estimate of 153.9 mln bags. Finally, data from the Green Coffee Association showed U.S. Sep coffee inventories rose +16% y/y to 7.19 mln bags, just below the 23-1/3 year high of 7.413 mln bags from Jul. Brazil's 2017 coffee output according to Confab may fall as much as -15% to 43.7 mln bags from 51.4 mln bags in 2016 since crops are in their lower-yielding half of their 2-year cycle.

Dec cocoa prices on Monday closed lower as a stronger dollar induced long liquidation in cocoa futures. Dec cocoa rallied to a 9-3/4 month nearest-futures high Friday on signs of stronger global chocolate demand after Barry Callebaut, maker of 25% of the world's chocolate, reported a +9.2% increase in volume in the three months through Aug. Cocoa prices were already in rally mode as ICE-monitored cocoa inventories have trended lower over the past 4 months down to an 8-1/2 month low Friday. Current cocoa output appears robust after Ghana, the world's second-largest producer, said its 2016/17 cocoa production rose +24% y/y to 969,438 MT, a 6-year high. Cocoa demand is generally strong with Q3 Asia cocoa grindings up +13% y/y to 167,737 MT, European Q3 cocoa grindings up +3% y/y to 353,544 MT, and Q3 North American cocoa grindings up +0.7% y/y to 125,263 MT. The Ivory Coast, the world's biggest cocoa producer, reported cocoa purchases, a sign of production, rose to 2.015 MMT from Oct-Sep 24, up +29% y/y and a record high. ICCO says 2016/17 global cocoa production reached a record 4.7 MMT, resulting in a 6-year-high global 2016/17 surplus of +371,000 MT.

Dec cotton on Monday posted a new 2-week high, but a stronger dollar spurred long liquidation in cotton and prices closed lower. Dec cotton posted that 2-week high on expectations for stronger global cotton demand after the USDA projected global 2017/18 cotton use will climb to 119.25 mln bales, the most since 2009. On the negative side, the USDA in Thursday's WASDE report unexpectedly raised its U.S. 2017/18 cotton production estimate to an 11-year high of 21.4 mln bales, more than expectations of a cut to 20.9 mln bales, and raised its global 2017/18 cotton production estimate to a 5-year high of 12.46 MMT from an Oct estimate of 120.8 MMT. The USDA also unexpectedly raised its U.S. 2017/18 cotton ending stocks estimate to a 9-year high of 6.1 mln bales, more than expectations of a cut to 5.5 mln bales. Dec cotton on Tuesday fell to a 1-1/2 week low as the pace of the U.S. cotton harvest picked up. Monday's USDA Crop Progress report showed 64% of the U.S. cotton crop harvested as of Nov 12, right on the 5-year average. A positive for cotton is strength in Chinese cotton demand as Chinese customs data show China Jan-Sep cotton imports up +37.7% y/y to 904,500 MT.