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Dailyfutures.com
Cocoa, Coffee, Sugar, and Orange juice Markets
Cocoa
Chart Comment
Cocoa trended higher for most of 2009, supported by a world production deficit. On January 29th, however, prices closed below the 100-day average - a bearish sign (updated 1-29).
Key Events - Cocoa
2010
2-1 - Fortis: Estimated 48,000 ton world production deficit in 2010-2011. Ending stocks to use ratio will fall from 42% to 35%.
1-22 - North American Q4 cocoa grind totals 111,986 tons, -1.5% from a year ago.
1-14 - European cocoa grind +.6% in Q4 from a year ago.
2009
12-17 - BNP Paribas Fortis predicts 63,000-ton world production deficit in 2009-2010.
12-3 - ICCO increased its world ending stocks estimate for 2008-2009 from 1.490 to 1.556 million tons, or 44% of annual use.
10-14 - European cocoa grind -1.5% in Q3 from a year ago.
9-8 - ICE: U.S. cocoa inventories at 2.79 million tons, the lowest in almost seven months.
8-25 - The International Cocoa Organization (ICCO) reduced its estimate of 2008-2009 world cocoa production from 3.47 to 3.46 million tons. The 2008-2009 ending stocks estimate was increased, however, from 1.47 to 1.49 million tons or 43% of annual use.
7-29 - Cocoa arrivals at Ivory Coast ports in 2008-2009 are down 15% from a year ago with nine weeks left in the season.
7-17 - North American cocoa grind -6.75% in Q2 from a year ago, better than expected.
7-9 - European cocoa grind -11.3% in Q2 from a year ago, less than expected.
4-17 - North American cocoa grind -13% in Q1 from a year ago.
Fundamental Notes
On March 4, 2007, the Ivory Coast government and rebel forces agreed to form a new government, but the national election keeps getting pushed back. The country has been divided since 2002 and it has been hard to reconcile the two sides since then. The other threats to the world's cocoa crop are primarily from weather - the swollen shoot virus and black pod disease. On May 1, 2009, Nestle announced that it will help farmers in West Africa plant one million new disease-resistant cocoa trees each year for the next ten years. The Ivory Coast and Ghana account for over one-half of the world's cocoa production.
Obtaining recent data on world cocoa statistics is difficult. On December 3, 2009, the International Cocoa Organization (ICCO) estimated that world cocoa production totaled 3.48 million tons in 2008-2009 and left 1.556 million tons of ending stocks, or 44% of annual use. On July 28, 2009, Barclays Capital predicted a world production deficit of 100,000 tons for 2009-2010 and on October 7th, Reuters news said that four other firms put out similar estimates.
| World Cocoa Market Estimates (in million metric tons) | |||||||||
| Year ending September 30, | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Net Production | 2.87 | 3.17 | 3.54 | 3.39 | 3.72 | 3.35 | 3.69e | 3.48e | |
| Grindings | 2.89 | 3.08 | 3.24 | 3.35 | 3.49 | 3.65 | 3.76e | 3.51e | |
| Ending Stocks | 1.34 | 1.41 | 1.68 | 1.69 | 1.88 | 1.57 | 1.58e | 1.56e | |
| Stocks/Use Ratio | .46 | .46 | .52 | .50 | .54 | .43 | .42e | .44e | |
Coffee
Chart Comment
Coffee prices have been choppy below $1.50 and on January 27th, prices fell below the 100-day average - a very bearish sign in spite of concerns that coffee supplies were tightening (updated 1-27).
Key Events - Coffee
2010
1-21 - Brazil Ag official: 2010-2011 coffee crop may only total 39 million bags due to recent heavy rain.
1-7 - Brazil's Conab: 2010-2011 coffee crop will total 47.3 million bags.
2009
12-18 - USDA: 2009-2010 world ending stocks will fall 6.3 million bags to 34.7 million bags, or 26% of annual use.
12-11 - ICE warehouse stocks at 3.17 million bags.
9-14 - Colombian National Coffee Growers Federation: The current harvest may fall to 10.3 million bags or less due to excess rain at harvest, down from 11.5 million bags a year ago.
9-11 - ICO increased its estimate of 2008 world consumption from 128.4 to 130.0 million bags.
6-12 - USDA: 2009-2010 world ending stocks will fall from 40.1 to 35.3 million bags or 27% of annual use.
1-1 - ICE coffee warehouse stocks at roughly 4.4 million (60-kg) bags.
Fundamental Notes
On December 18, 2009, the USDA estimated 2009-2010 world coffee production at 125.2 million (60 kg) bags with implied use of 131.4 million bags. That puts 2009-2010 ending coffee stocks at 34.7 million bags, or 26% of annual use which is historically on the low end. They also estimate that Brazil harvested 43.5 million bags in 2009-2010, down from 51.5 million bags the previous year. On January 7, 2010, Brazil's government (Conab) said that they expect the coffee crop to increase to 47.3 million bags in 2010-2011.
In its December report, the International Coffee Organization (ICO) said that 2009-2010 world coffee production totaled "around 123.7 million bags." With world consumption estimated at 132 million bags in 2009, they expect "that coffee supplies are likely to remain tight in 2010..."
| USDA World Coffee Market Statistics (in million 60-kg. bags) - Includes stocks in non-producing countries. | ||||||
| Year ending Sept. 30, | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Production | 122.6 | 117.0 | 133.6 | 122.2e | 130.0e | 125.2e |
| Implied Use | 118.6e | 124.4e | 129.4e | 128.3e | 125.7e | 131.8e |
| Ending Stocks | 46.0 | 38.6 | 42.8 | 36.7e | 41.0e | 34.7e |
| Stocks to Use ratio | .38e | .31e | .33e | .29e | .30e | .26e |
| Billions of bearing trees in Brazil | 5.26 | 5.33 | 5.73 | 5.72 | 5.89 | 5.73 |
| USDA Brazil coffee map | ||||||
Sugar
Chart Comment
The USDA tipped us off early when they predicted on May 2, 2009 that 2009-2010 would end with the lowest world stocks to use ratio in 16 years. The higher close on December 10th was also impressive and led to another nice rally. Prices are so high that I am content sit out (updated 1-22).
Key Events - Sugar
2010
2-8 - Kingsman est.: 11.9 million ton world production deficit in 2009-2010.
4.0 million ton surplus in 2010-2011.
2-8 - India Sugar Mills est.: India may produce 23.5 million tons of sugar in 2010-2011.
2009
12-30 - India extends its ban on futures trading in sugar until September 30, 2010.
11-24 - ISO est.: World production surplus of .75 million tons in 2010-2011.
11-19 - USDA: 2009-2010 world ending stocks to use ratio estimated at 17%, the lowest since 1993-1994.
11-13 - ISO est.: World production deficit of 7.2 million tons in 2009-2010.
10-19 - Czarnikow: Prices will have to go higher to ration demand.
9-3 - ISO: Estimates 2009-2010 world production at 159 million tons, short of consumption by 8.4 million tons.
8-31 - Private firm, Kingsman, predicts 7 million ton world production deficit in 2009-2010.
5-26 - India's government bans futures trading in sugar for the rest of 2009 and considers extending duty-free import policy for sugar to help boost local supplies.
5-21 - USDA: 2009-2010 world endings stocks to use ratio will be 19%, the lowest in 16 years.
4-9 - India's government gives approval to import 1 million tons of white sugar with no duty by August 1st.
Fundamental Notes
On November 19, 2009, the USDA said that 2009-2010 world sugar production will total 153.5 million tons up from 143.8 million tons the previous year. Sugar stocks at the end of 2009-2010 are expected to be down 1.6 million tons to 26.0 million tons, or 17% of annual use. If true, that will be the lowest stocks to use ratio since 1993-1994. The USDA expects the largest producer, Brazil, to produce 35.75 million tons in 2009-2010, up from 31.85 million tons the previous year. On December 16, 2009, Brazil estimated that they will produce 34.6 million tons of sugar and 25.8 billion liters of ethanol from 612 million tons of sugarcane in 2009-2010. Beware: the USDA commonly revises its world sugar data as far back as four years or more.
On November 13, 2009, the International Sugar Organization (ISO) predicted that world production will fall short of consumption by 11.3 million tons in 2008-2009 and by 7.2 million tons in 2009-2010. On November 24, 2009, the ISO said that it expects world production to exceed consumption by .75 million tons in 2010-2011.
| World Sugar Market Statistics (in million metric tons) | |||||||||
| Year ending Sept. 30, | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Production | 134.3 | 148.5 | 142.4 | 140.7 | 144.9 | 164.5 | 163.3e | 143.8e | 153.5e |
| Implied Total Use | 133.3 | 144.3 | 144.4 | 145.6 | 147.5 | 156.2 | 164.8e | 156.0e | 155.1e |
| Ending Stocks | 36.6 | 40.5 | 38.5 | 33.7 | 31.1 | 39.4 | 39.8e | 27.6e | 26.0e |
| Stocks to use ratio | .27 | .28 | .27 | .23 | .21 | .25 | .24e | .18e | .17e |
| Brazil sugarcane map | |||||||||
Orange juice
Chart Comment
On September 18th, the USDA said that Florida has the lowest commercial acreage of orange trees since 1986. On October 9th, the USDA estimated the upcoming Florida crop at 136 million boxes, less than expected. The extent of damage from January's cold spell is not known for sure yet. Currently, prices are trading between the 100-day average and $1.50 (updated 1-29).
Key Events - Orange Juice
2010
1-12 - USDA: Florida's 2009-2010 orange crop estimate kept at 135 million boxes. Does not include January freeze damage yet.
1-4 - Central Florida has chances for freezing temperatures in four of five days this week.
2009
12-18 - USDA: Brazil's 2010-2011 orange crop estimated at 435 million boxes, up from 427 mb in 2009-2010.
12-10 - USDA: Florida's 2009-2010 orange crop estimated at 135 million boxes.
11-24 - USDA: U.S. ending stocks of orange juice to fall from 681 million sse gallons in 2008-2009 to 445 million sse gallons in 2009-2010.
11-24 - USDA est.: Brazil will export 1.699 billion sse gallons of orange juice in 2009, the lowest in eight years.
10-9 - USDA: Florida's 2009-2010 orange crop estimated at 136 million boxes, less than expected.
9-18 - USDA: 492,529 acres of commercial orange trees in Florida, down 1% from a year ago and the lowest total since 1986.
Fundamental Notes
On January 12, 2009, the USDA kept its estimate of the 2009-2010 Florida orange crop at 135 million boxes, down from 162 million boxes the previous year. The projected juice yield was reduced from 1.63 to 1.60 gallons per box at 42.0 degrees Brix, down from last year's 1.66 gallons per box. The report did not yet take into account any damage from weather since January 1st.
On September 18, 2009, the USDA said that Florida had 492,529 acres of commercial orange groves, the lowest since 1986. On November 24, 2009, the USDA said that U.S. ending stocks of orange juice would fall from 681 to 445 million sse gallons, or 33% of annual use. As of December 31, 2009, there were 1.19 billion pounds of frozen orange juice in U.S. cold storage, up 9% from a year ago.
Brazil, the world's largest producer of orange juice, has potential problems on the horizon. Brazil has lost over two million trees to sudden citrus disease and orange farmers are also concerned about an outbreak of citrus greening disease. There is no cure to this disease, it is fatal to the trees, and it may have already spread throughout the country. In addition, on January 9, 2006, the U.S. began charging Brazilian exporters a 15% tariff (or more, depending on the exporter's cooperation) for "dumping" orange juice in the U.S. On November 24, 2009, the USDA said that it expects Brazil to produce 1.73 billion sse gallons of orange juice in 2009-2010, up slightly from the previous year. They also expect 1.699 billion sse gallons of exports in 2009, the lowest in eight years.
Notable Quote:
The average cost to manage an acre of (Florida orange) grove - including fertilizer, irrigation and applying pesticides and other farm chemicals - was $775 in 2002-03, (Ron) Muraro (an economist with the University of Florida's Citrus Research and Education Center) reported. The cost just for those items rose 61 percent to $1,246 in 2007-08.
But adding $500 per acre as the cost to control citrus greening, a fatal bacterial disease, took the average caretaking cost to $1,752 in 2007-08, more than double from five years earlier.
Given those costs, growers need to get at least $1.20 to $1.25 per pound solids on their oranges just to break even on growing oranges, (Allen) Morris (an economist with the University of Florida's Citrus Research and Education Center) said.
Kevin Bouffard, The Ledger.com. August 20, 2009.
| Florida Orange Juice Market Statistics (in million boxes) | |||||||||
| Year ending September 30, | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Production | 223 | 230 | 203 | 150 | 148 | 129 | 170 | 162e | 135e |
| Brazil citrus map | |||||||||
Degrees Brix?
Brix is a measurement of the juice's sugar content with a higher degree of Brix representing a higher sugar content. A common note on USDA reports says that one metric ton at 65 degrees Brix equals 344.8 gallons at 42 degrees Brix, or 1,405.88 gallons at single strength equivalent.
Citrus Greening
Citrus greening is an incurable disease that hits orange, lemon, grapefruit and other citrus trees. It is spread by an aphid-like insect, the Asian citrus psyllid. It attacks the plant's vascular system and causes mottling on leaves and lopsided fruit that remains half-green. So far in the United States, it has shown up only in Florida, which provides 80% of the USA's orange juice, according to Florida Citrus Mutual, which represents 8,000 growers.
Brazilian growers have been battling it for 10 years, says Michael Rogers, an entomologist at the University of Florida. Infection rates in Brazilian groves where the insects were not controlled rose to 40% from 2% in three years, he says.
Oren Dorell, USA Today. October 2, 2007.
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