Tuesday, 24 March 2015 17:48
LONDON: Arabica coffee and raw sugar futures rose on Tuesday as Brazil’s real currency extended its recovery against the dollar while cocoa futures eased.
May arabica coffee was up 2.95 cents or 2.1 percent at $ 1.4480 per lb at 1221 GMT while May raw sugar rose 0.11 cents or 0.9 percent to 12.85 cents a lb.
Dealers said recent weakness in both arabica coffee and raw sugar futures had been linked to the depreciation of Brazil’s real currency.
A slight recovery in its performance against the dollar this week has provided some support for arabica coffee and sugar although the overall trend of the Brazilian currency is likely to remain weak.
“The main story is still in place that the weak real is pushing down prices of soft commodities especially arabica coffee and raw sugar,” Commerzbank analyst Michaela Kuhl said.
The market was also keeping a close watch on the outlook for the arabica harvest in Brazil.
“It is a very diverse picture at the moment and we will have to wait to see what the first results of the harvest will be when it starts in April,” Kuhl said.
The situation is similar in sugar with the cane crushing in the key Centre-South region of Brazil set to begin in April.
A key focus is likely to be the extent of any increase in the use of cane to produce biofuel ethanol rather than sugar.
“Everyone was expecting the share of sugar cane going into ethanol production to increase further over the next season,” Kuhl said.
“There are some voices now saying that might not be in the extent which is expected now but that is very unsure at the moment,” she added.
Robusta coffee futures were also higher with May up $ 16 or 0.9 percent at $ 1,854 a tonne.
Dealers said the market was underpinned by talk that Brazil’s conillon (robusta) crop may be smaller than expected this year and concern about dry weather in Vietnam.
One analyst, however, downplayed those concerns.
“There are dry areas (in Vietnam) and there are also areas with humidity in the region, these are normal conditions,” said independent analyst Nguyen Quang Binh.
Cocoa futures were lower as rains boosted the outlook for the mid-crop in Ivory Coast.
May New York cocoa was down $ 22 or 0.8 percent at $ 2,735 a tonne. May London cocoa fell 13 pounds or 0.7 percent to 1,907 pounds a tonne.
Copyright Reuters, 2015
