Sugar Gaps Lower on Brazil’s Weak Real

SUGAR

March Sugar gapped lower overnight after the Brazilian real collapsed in the wake of Brazilian President Lula da Silva’s reelection over the conservative candidate Flavio Bolsonaro, as the lower currency value increases the incentive for Brazilian exporters to sell. The UNICA report on Friday showed Brazil Center-South sugar production recovering in August, but cumulative production for the marketing year starting in April still down from a year ago and below the five-year average. The Ag Ministry released data for the second half of September on October 15 that showed Center-South sugar production at 2.86 million tons for the period, down 6% from a year earlier. UNICA reports have been lagging the Brazilian Ag Ministry this year, and the UNICA results were likely viewed as “old news.” Last week India extended the deadline for allowing duty-free ‌imports of 1 million metric tons of raw sugar to December 31 from October 31, giving importers more time to bring in the commodity to the world’s biggest sugar-consuming country.

COFFEE

December Coffee gapped lower early Monday and fell to its lowest level since October 15. The Brazilian real collapsed overnight after the Brazilian President Lula da Silva was reelected after being declared a winner over Flavio Bolsonaro. The weaker currency could encourage Brazilian exporters to step up their sales. The real had gained after Bolsonaro won a preliminary election. Bolsonaro is contesting the results which may add to the currency’s volatility, as it could increase the risk of political instability. The nearby real fell to its lowest level since last December overnight. ICE certified arabica stocks fell 6,455 bags on Friday to 227,978, their lowest since September 15. Stocks fell 12,789 bags last week. Perhaps the drop in the real will change this trend. World Weather said southern Indonesia saw some rain over the weekend after being dry for months. The region is expected to see a gradual increase in rain over the next few weeks. Vietnam rainfall has diminished greatly recently, although scattered showers will continue for a while. Brazil rainfall is expected to occur often in the next ten days supporting good coffee development.

COCOA

December Cocoa edged lower early Monday, below a two week consolidation range. Ample old crop supplies (as indicated by large exchange stocks) counter concerns that El Nino will hurt upcoming production in West Africa. World Weather Inc. said the west-central Africa is beginning to dry down and that seasonal rains are in decline in many areas from Ivory Coast into Nigeria, but that is not unusual for this time of year. The region could see some periodic showers over the next week to ten days, which will be welcome, but the distribution will be erratic and some areas may not get rain often enough to counter evaporation. ICE cocoa stocks increased by 19,149 bags on Friday to 3.675 million, the highest since May 28, 2024.

COTTON

December Cotton broke below the recent consolidation range early Tuesday. The collapse in the Brazilian real in the wake of Lula da Silva’s reelection does boost the incentive for Brazilian exporter to sell. Favorable weather in the US this week could add to harvest pressure. World Weather Inc. said rainfall over the northwestern Texas Panhandle over the weekend disrupted some farming activity, but the rains were light. The Delta and southeast were dry and will remain that way through the week. Some rain may occur this weekend and again next week. Three government and industry sources in India told Reuters they expect the government to extend duty-free cotton imports for another two months through December. This could boost imports from the US, Brazil and Australia.

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