LONDON: Arabica coffee futures on ICE hit a 3-1/2-week high on Tuesday after surging 5% in the previous session as investors remained jittery about frost risk this season in top producer Brazil.
Raw sugar hit its highest in nearly a month.
July arabica coffee was up 0.9% at $2.2685 per lb at 1423 GMT, after hitting a more than three week high of $2.2790 earlier in the session.
Farm areas in Brazil’s center-south may be hit by light frosts in the coming days, raising concerns about corn, coffee and sugarcane crops.
Although many forecasters say it is too early in the season for frost damage to occur, dealers said the market fears frost risk this season is not fully priced in at present.
“The consequences of frost are massive. (Even) a temperature of +2C can damage the coffee plant if the cold persists over multiple instances,” said a dealer.
July robusta coffee rose 0.7% to $2,102 a tonne.
July raw sugar rose 1.3% to 19.94 cents per lb, having hit its highest in nearly a month at 19.96.
Dealers said that while sugar could pull back this week if the weather in Brazil moderates, it is seeing longer-term upward pressure from increased weather risks and from rising prices for energy, grains and fertiliser.
Rising energy prices tend to lift the price of ethanol, as do rising grains prices. This can tempt cane mills in top sugar producer Brazil to produce less of the sweetener and more of the biofuel.
Traders told Reuters at Sugar Week in New York last week that Brazilian cane mills are cancelling some sugar export contracts and diverting production to ethanol.
August white sugar rose 0.5% to $551.70 a tonne.
July New York cocoa was up 0.4% at $2,531 a tonne.
Cocoa arrivals at ports in top grower Ivory Coast reached 1.841 million tonnes between Oct. 1 and May 15, exporters estimated, down 3.9% from the same period last season.
July London cocoa fell 0.6% to 1,805 pounds per tonne.