Brazil, the largest producer of sugar and coffee in the world, is still experiencing one of the worst droughts in its history. Global prices for both commodities hit all-time highs on Thursday as investors continued to monitor the situation due to the ongoing dry conditions and no immediate relief indicated by weather forecasts.
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Impact of Adverse Weather on Brazil's Production
Some sugar-producing regions have seen farmland fires as a result of the drought, and the arabica crop—which is currently in its crucial flowering stage—has been severely impacted.
Although some weather models indicate rain is expected in Brazil, analysts from LSEG say it is unlikely to come until mid-to-late October, if at all, according to AFP.
“Overall, Brazil's forecast appears mostly negative for October, with some relief toward the end of the month,†they stated.
Experts and dealers in the coffee industry have pointed out that although regular rainfall could potentially bring Brazilian trees back to life, the overall state of the crop is still unstable. Benchmark arabica futures on the ICE exchange surged to a 13-year high of $2.7380 (Rs 229.11) per pound due to scarcity; by 11:23 GMT (4:53 pm IST), prices were up 0.9% at $2.7150 (Rs 227.14). Similarly, futures for raw sugar hit a 7-month high of 23.71 cents per pound and were then up 1% at 23.66 cents.
Coffee Output in Vietnam
As traders report good weather, local prices in Vietnam, the world's largest producer of robusta coffee, have dropped this week in anticipation of the upcoming harvest. Given the degree of interchangeability between the two grades of arabica, a rise in Vietnamese output might be able to partially offset the upward pressure on prices. However, bad weather was experienced in Vietnam earlier this year, and it is expected that this will show in the upcoming crop, according to AFP.
Robusta coffee futures, which hit a record high in almost half a century last week, were up 1.4% at $5,223 a metric ton as of 1123 GMT, while white sugar futures were up 0.6% at $600.40 a ton.
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REFERENCE- The Times of India
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