Raw sugar prices ended below 11 cents a pound for the first time in six-and-a-half years Monday as the Brazilian real continued its slide against the dollar.
Brazil is the biggest producer of the sweetener in the world, and when the real weakens against the dollar, the favorable exchange rate makes sales of dollar-denominated sugar more valuable in reais terms. The Brazilian real has dropped 10% in a month as investors grow increasingly concerned about the stability of Brazil’s economy amid a political corruption scandal there.
Raw sugar for October delivery ended at 10.89 cents a pound on the ICE Futures U.S. exchange, the lowest since Dec. 23, 2008.
“The futures sugar market in New York behaves like an endless rerun of a horror movie,” Arnaldo Luiz Correa, director at Archer Consulting in Santos, Brazil, said in a note.
Mr. Correa said that over the last 20 sessions, the devaluation of the real has accounted for 60% of the fall in sugar prices, but he said the value of the commodity in reais per ton is less volatile. He said the contract could trade as low as 9.5 cents per pound, the lowest in seven years.
Sugar attempted a rally last week, reaching 11.64 cents a pound on Thursday, but failed and closed lower on the week. El Niño weather fears in major growing regions have been largely discounted at this point, as dry weather in Brazil is helping harvests and there are no longer fears of a “failed” monsoon in major sugar cane growing regions in Asia, Robin Shaw, analyst at Marex Spectron, said in a report.
“The dry weather in center-south Brazil and the prospect of five millions tons of sugar being dumped out of the region every month during this peak period of the crop, coupled with the continuing weakness of the Real, did not give a rally much of a chance,” Mr. Shaw said.
In other markets, cocoa for September delivery fell 1.3% to $3,166 a ton, its lowest close since June 12. The contract has met resistance in its attempts to break higher at a time when money managers are heavily betting on higher prices, making it vulnerable to a sell off, the Hightower Report said.
“Economic data remains less than desirable in China and in Europe, so demand ideas are not real strong,” Jack Scoville, vice president at Price Futures Group in Chicago said in a note. Western Europe is the largest consumer of cocoa and China is considered an important growth market for chocolate’s main ingredient.
Traders are awaiting news on port arrivals in Ivory Coast to see if dry weather in the world’s largest cocoa growing region has impacted crops there. Showers will continue to be below normal in prime cocoa growing regions in West Africa over the next 10 to 30 days, according to WeatherBELL Analytics in New York.
Cotton for December delivery fell 0.3% to 64 cents a pound on concerns about lower demand from China—the world’s largest cotton importer—along with positive growing conditions in India, which by some estimates is posed to outpace China as the world’s largest cotton producer.
The International Cotton Advisory Committee said Monday that Chinese imports could fall 10% to 1.6 million tons in the year ended July 31, 2016 as the government limits imports to the minimum required under World Trade Organization rules to drive up demand for its own cotton and the massive stockpiles it has in reserve. Imports outside of China are forecast to increase by 4% to 6.1 million tons, the group said.
September frozen concentrated orange-juice futures jumped 3.7% to end at $1.2815 a pound, the highest close since March 30 and the largest one-day move in nearly a month. Arabica coffee for September delivery fell 1% to close at $1.2395 a pound.
