World coffee, sugar prices surge as drought-hit Brazil awaits rains

World coffee, sugar prices surge as drought-hit Brazil awaits rains


WORLD coffee and sugar prices surged to new highs on Thursday (Sep 26) as investors remained focussed on drought-hit Brazil, the top grower of both commodities, with weather forecasts continuing to indicate dry conditions.

Brazil is experiencing one of its worst droughts on record. Farmland fires have broken out in some sugar-producing regions as a result, while arabica is even more affected as the crop is in the critical flowering phase.

LSEG analysts say that while some weather models predict rains will finally arrive in Brazil, these will likely materialise only towards mid-to-late October, if at all.

“Overall, the forecast for Brazil looks largely negative heading into October, with a hint of relief towards the end of the month,” they said.

Coffee dealers and industry experts said trees in Brazil could yet spring back to life if consistent rains materialise, but the situation as regards the crop overall is hanging by a thread.

Benchmark arabica futures traded on the ICE exchange hit a new 13 year high of US$2.7380 per lb and were trading up 0.9 per cent at US$2.7150 by 1123 GMT. Raw sugar futures hit a fresh seven month peak of 23.71 cents per lb earlier and were later trading up 1 per cent at 23.66 cents.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

The expectation that Brazil will enter one of the longest between-crops periods in decades has broken speculators’ months-long strategy to short the New York sugar market.

In top robusta coffee producer Vietnam, local prices fell this week ahead of the new harvest, with traders saying the weather remains supportive.

Increased output from Vietnam could help ease the upward pressure on arabica prices, as the two grades are to some extent fungible. However, Vietnam suffered adverse weather earlier this year and it is widely expected the upcoming crop will reflect this.

Robusta coffee futures, which hit their highest in nearly half a century last week, were trading up 1.4 per cent at US$5,223 a tonne by 1123 GMT, while white sugar futures were up 0.6 per cent at US$600.40 a tonne.

In other soft commodities, December New York cocoa rose 3.7 per cent to US$8,250 a ton, while March London cocoa rose 1.7 per cent to 4,609 pounds per tonne. REUTERS



Source link

Advertisement - Continue Reading Below

Advertisement - Continue Reading Below