ICE sugar slides as Brazilian Real weakens in light of accusations against President
Published: 05/18/2017, 4:21:16 PM
Raw sugar and arabica coffee futures tumbled on Thursday, under pressure as Brazil's real currency fell sharply following allegations that the country's president bribed a witness in a graft probe, according to Reuters.
Brazil is the top producer of both commodities.
July raw sugar was down 0.44 cents, or 2.7%, at 15.86 cents per lb by 1421 GMT, after dipping to a session low of 15.58 cents.
The spot real market tumbled by more than 8% on Thursday. June futures trading on the currency had previously been halted after falling sharply.
This pressured sugar prices, since a weaker real makes prices more attractive for Brazilian producers in local currency terms, encouraging them to step up sales.
It also encourages the use of cane to produce sugar, much of which is exported for dollars, rather than ethanol, which is largely sold on the domestic market for local currency.
"This clearly has big implications for the sugar/ethanol price parity calculations in CS Brazil which have received so much attention as a potential 'soft bottom' to the sugar market," said James Liddiard, a consultant with Agrilion.
The ethanol parity level was previously widely cited as around 15 cents.
The market continued to monitor weather in Brazil with concerns that heavy rains over the next few days could disrupt production.
August white sugar was down US$9.40, or 2.05%, at US$449.80 a tonne, falling in tandem with raw sugar.