Coffee and sugar price forecasts slashed up to 31 percent as Brazil real falls

Banks including Goldman Sachs and Citi have slashed their forecasts for coffee and sugar prices by as much as 31 percent in the past month as the value of Brazil's real currency slumped to its lowest in 12 years.
With sugar prices now languishing near the lowest levels in more than six years below 13 cents per lb, six banks are now forecasting an average of second-quarter prices of around 13.6 cents per lb, down about three cents from earlier forecasts, according to data collected by Reuters. Rabobank's forecast was the most bearish at 12.5 cents.
In arabica coffee, the average estimate fell to $1.52 per lb from $1.90, the data show. Citi cut its second quarter forecast by 31 percent, the most of any bank surveyed, but still held the most bullish third-quarter forecast at $1.75 per lb.
A leading cause of the downward revision has been the tumbling real
in Brazil, the world's biggest producer of both commodities. It fell nearly 30 percent against the dollar between late January and March 20, when it reached a 12-year low due to the greenback's strength and also growing political uncertainty stemming from a corruption scandal at state-run oil company Petrobras.
"A rising dollar generally reduces global demand for dollar-denominated commodities, while a weakening Brazilian real significantly encourages exports, boosting global inventories," wrote Societe Generale in an April 7 report.
Several banks also pointed to abundant global sugar supplies as a source of nearby price pressure.