NEW DELHI: Brazil, the world’s leading producer of coffee and sugar, continues to face one of the most severe droughts in its history. The dry conditions have persisted, and weather forecasts indicate no immediate relief, causing global prices for both commodities to reach new heights on Thursday as investors remain focused on the situation.
The drought has led to the outbreak of farmland fires in some sugar-producing areas, while the arabica crop, currently in its critical flowering stage, has been hit even harder.Analysts from LSEG suggest that although some weather models predict the arrival of rain in Brazil, it is unlikely to materialize until mid-to-late October, if at all, AFP reported.
They state, “Overall, the forecast for Brazil looks largely negative heading into October, with a hint of relief towards the end of the month.”
Coffee industry experts and dealers have noted that consistent rainfall could still revive the trees in Brazil, but the overall crop situation remains precarious. The scarcity has driven benchmark arabica futures on the ICE exchange to a 13-year high of $2.7380 (Rs 229.11) per lb, with prices trading up 0.9% at $2.7150 (Rs 227.14) by 11:23 GMT (4:53 pm IST). Similarly, raw sugar futures reached a 7-month peak of 23.71 cents per lb and were later trading up 1% at 23.66 cents.
In Vietnam, the world’s top robusta coffee producer, local prices have decreased this week in anticipation of the new harvest, with traders reporting favorable weather conditions. An increase in output from Vietnam could potentially alleviate some of the upward pressure on arabica prices, as the two grades are somewhat interchangeable. However, Vietnam experienced adverse weather earlier this year, and it is widely anticipated that the upcoming crop will reflect this, reported AFP.
As of 1123 GMT, robusta coffee futures, which reached their highest level in nearly 50 years last week, were trading up 1.4% at $5,223 a metric ton, while white sugar futures were up 0.6% at $600.40 a ton. In other soft commodities, December New York cocoa rose 3.7% to $8,250 a ton, and March London cocoa rose 1.7% to 4,609 pounds per ton.