NEW YORK/LONDON: Raw sugar and arabica coffee futures fell on Tuesday, nearing last week’s multi-year lows, on renewed weakness in the currency of Brazil, the top producer of both commodities.
A weaker Brazil real makes dollar-denominated prices more attractive in local currency terms, and can encourage producer and speculative selling.
October raw sugar settled down 0.2 cent, or 1.9 percent, at 10.31 cents per lb. This was just above last week’s 10-year low of 9.91 cents.
The move caused the October/March spread to narrow sharply, with the October discount moving to 0.7 cent versus 0.82 cent on Monday.
Market pressure continued to come from ample global supplies, though the main driver on Tuesday was the weak currency in Brazil, traders said.
Concerns that adverse weather in the European Union could tighten white sugar supplies, lifted those prices, traders said.
“Weather in Europe has not been beneficial to beets as it has been very hot and dry and once again there will be questions on how much deliverable sugar there will be available for Oct (whites) expiry in a fortnight’s time,” Sucden Financial senior trader Nick Penney said in a market note.
October white sugar settled up $6.60, or 2.1 percent, at $317.20 per tonne.
December arabica coffee settled down 2.7 cents, or 2.6 percent, at $1.0305 per lb, moving back down toward last week’s 12-year low of 99.35 cents.
“Political uncertainty in Brazil will keep the real volatile and further devaluations will limit the gains of commodity prices in which Brazil is dominant (such as coffee and sugar), eventually leading to specs to sell the market again,” said Rodrigo Costa, director of trading for Comexim USA, in a note.
November robusta coffee settled down $5, or 0.3 percent, at $1,536 per tonne.
The second-position contract hovered just above the prior session’s low of $1,525, the weakest since April 2016, on pressure from forecasts for a large crop in top grower Vietnam, traders said.
December New York cocoa settled down $26, or 1.1 percent, at $2,320 per tonne.
Dealers said the market was weighed partly by favorable crop conditions in top grower Ivory Coast.
December London cocoa settled down 24 pounds, or 1.4 percent, at 1,706 pounds per tonne.
The September discount to December narrowed sharply to 51 pounds, from 66 pounds the prior session.