Softs Report - Tuesday, 18

Brazilian farmers will produce 628.1 million tons of sugar cane in the current season, a decline of 4% from the 2020-2021 season, Conab said Tuesday in its first forecast for the cycle. Sugar output will fall 5.7% to 38.9 million tons and production of ethanol, from sugar cane and from corn, will decline 6.8% from the previous season to 30.5 billion liters, it said.
Brazil, the world’s biggest producer and exporter of sugar, is suffering from a lack of rain in many of its most important agricultural areas, leading analysts to forecast lower productivity for the country’s coffee and corn crops as well. Conab is scheduled to publish its second forecast for the 2021 coffee growing season on May 25.
Some Brazilian sugar cane farmers are switching over to soybean and corn production because of better prices on world markets for those commodities, Conab said, and the agency forecast a decline in the planted area for sugar cane of 2.2% in 2021-2022.
Brazil has the world’s largest fleet of vehicles that can run on either gasoline or ethanol, and all the gasoline in the country also has ethanol blended into it. The price for ethanol in Brazil is normally set based on the price of gasoline, making it vulnerable to swings in global oil and fuel prices.
The scant precipitation in some areas and an outlook for continued dry weather will likely lead to Brazilian mills using a greater proportion of the sugar cane crop to produce ethanol at the expense of the sweetener, according to Conab. The outlook for low ethanol prices this year, because of lower-than-normal domestic demand and falling oil prices, could reverse that trend, Conab added.

COCOA
General Comments: New York and London closed higher again yesterday. Weekly price trends are up in London and are turning up in New York. The daily charts show sideways trends in New York but up trends in London. The harvests are over in West Africa and ports there have been filled with Cocoa. European demand has been slow as the quarterly grind data showed a 3% decrease from a year ago in grindings. This has been caused by less demand created by the pandemic. Asian demand improved. North American data showed improved demand. But, the supplies are there for any increased demand.
Overnight News: Isolated showers are forecast for West Africa. Temperatures will be near to above normal. Malaysia and Indonesia should see showers. Temperatures should average above normal. Brazil will get mostly dry conditions and near to above normal temperatures. ICE certified stocks are lower today at 5.195 million bags.
Chart Trends: Trends in New York are mixed. Support is at 2510, 2408, and 2450 July, with resistance at 2550, 2570, and 2590 July. Trends in London are up with objectives of 1740 July. Support is at 1690, 1660, and 1630 July, with resistance at 1730, 1760, and 1770 July.

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