LONDON: Sugar and coffee prices slid by more than 4 percent on Monday as the real currency in top grower Brazil slumped on President Luiz Inacio Lula da Silva’s surprise re-election.
A weak real tends to encourage exporters in Brazil to sell dollar-priced sugar and coffee by raising their returns in local currency terms. Raw sugar futures on ICE, seen as a global price benchmark, were down 4.4 percent at 19.34 cents per lb at 1352 GMT, having earlier hit their lowest since early October at 19.31. ICE arabica coffee futures were down 3.4 percent at USD2.9690 per lb, well off Wednesday’s six-week high of USD3.1820. Brazil’s real slid around 12 percent against the US dollar, while trading on the Brazilian stock exchange was briefly halted as the country’s stock index futures tumbled.
The falls mark a sharp reversal from a rally prompted by widespread expectations during October that right-wing candidate Flavio Bolsonaro would win.
“It’s 100 percent the real. The cost of production in Brazil (now) reduces in dollar terms,” said an independent sugar industry consultant.
White sugar was down 2.8 percent at USD519.90 a metric ton, having earlier slid to its lowest since early October, while robusta coffee fell 1.9 percent to USD3,181 a metric ton, having earlier hit its lowest since early March 2024.
Robusta is under pressure as the harvest gets underway in top grower Vietnam and exchange stocks rise. While a weak real is bearish for raw sugar and arabica prices, coffee consultant Michael J Nugent said that while Lula’s rhetoric may concern markets, his instinct is to bargain.
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