Coffee, Sugar Gain With Biggest Crops Under Heat, Dryness Stress

(Bloomberg) -- Coffee and sugar futures extended last week’s gain with high temperatures and dry forecasts for top producer Brazil boosting bulls.

Arabica coffee for December rose 0.3% to $1.8625 a pound on ICE Futures U.S. after advancing 3.7% last week. The beans favored by Starbucks Corp. have rallied almost 60% in the past year. Raw sugar for October added 0.4% to 20.03 cents a pound for a 12-month gain of 53%.

Brazilian sugar cane and coffee crops will stay hot and dry most the next two weeks, adding to extended dryness to the beleaguered crops hit by drought and frost during the past year.

The current situation is similar to 2014, when drought curbed production prospects and kept prices elevated for two years, said Hernando de la Roche, senior vice president for StoneX Financial Inc. There’s increasing concern that production prospects were reduced not only for 2022 but also for 2023 because frosts destroyed seedlings and new ones will be needed, he said. That’ll delay a rebound since trees take at least two years to start producing again.

Still, de la Roche said there is hope that the higher prices will allow producers outside Brazil to boost output, and traders are still assessing the impact of the Covid-19 variant on the economy as well.

For sugar, traders are yet to get a strong handle of the damage to Brazil’s crops even after estimates for Brazil’s key Center-South have been cut from 605 million metric tons of cane reaped last year to as low as 490 million to 500 million tons in the 2021-22 season.

“The short-term continues with limited demand,” though the market seems to be preparing for what may be a tighter medium-term, depending on whether impacts in the Center-South aggravate sugar availability, StoneX said in a report.

In other soft commodities, cocoa and orange juice futures dropped.

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