Raw sugar hits 6-1/2-year low on weak Brazil currency

Raw sugar futures dropped almost 2 percent to a new 6-1/2-year low on Monday, pressured by a weaker Brazilian currency and hefty stocks in India and Thailand. The weakening in the Brazilian real also dragged on arabica coffee futures, while New York cocoa eased in technically driven selling. Benchmark raw sugar futures hit a 6-1/2-year trough of 10.92 cents a lb, pressured by the falling real against the US dollar.
A weaker real boosts local currency returns to Brazilian producers from sales of dollar-based sugar and arabica coffee. "There is plenty of sugar around, and probably we will reach new lows if the real weakens further," Claudiu Covrig, senior agricultural analyst with data provider Platts, said. Hamish Smith of Capital Economics said: "In the past few days and weeks, the bleak outlook for the Brazilian economy has been a particular factor that's been weighing on the real."
Michaela Kuhl of Commerzbank said: "It's quite probable that we have not yet seen the weakest point in the real." October raw sugar futures on ICE were down 0.18 cent, or 1.6 percent, at 10.96 cents a lb at 1323 GMT, after falling to 10.92 cents, the lowest since December 2008. October white sugar was down $1.60, or 0.5 percent, at $347.80 per tonne. The 19-commodity Thomson Reuters/Core Commodity CRB Index , which has shed 12 percent so far this year, hit the lowest level in more than six years on Friday.
The most-active September arabica coffee contract on ICE Futures US was down 2.2 cent, or 1.8 percent, at $1.2305 per lb. "Coffee is still at very low levels. We still see a deficit this year. So I think we have seen coffee prices going down mainly because of the situation with the Brazilian real," Carlos Mera, analyst with Rabobank, said. "If the real keeps losing value, we will expect further drops in coffee," Mera added.
Robusta coffee also dropped, with September futures down $11, or 0.7 percent, at $1,627 a tonne, after touching a two-month low of $1,621, basis front month. Cocoa futures eased on technically driven selling, pressured by expectations for subdued demand. New York September cocoa fell $21, or 0.7 percent, to close at $3,188 a tonne. London September cocoa on ICE traded down 9 pounds, or 0.4 percent, at 2,122 pounds a tonne.