By Julie Wernau
Raw sugar prices broke 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 fell as low as 10.92 cents a
pound on the ICE Futures U.S. exchange and was recently down 1.3%
to 11 cents a pound, the lowest since Dec. 26, 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 session, 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 Nino
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 sugarcane
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 0.6% to
$3,191 a ton. 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. 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 1.1% to 63.48 cents a pound,
headed toward its lowest close since June 15, 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.
September frozen concentrated orange juice futures jumped 2% to
$1.2605 a pound, and arabica coffee for September delivery fell 1%
to $1.2405 a pound.
Write to Julie Wernau at julie.wernau@wsj.com
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