Sugar futures gained Monday, as traders expected the wet weather in Brazil over the weekend to hamper production and transportation of the sweetener.
Raw sugar for July delivery added 0.8% to settle at 16.51 cents a pound on the ICE Futures U.S. exchange.
The sugar market showed some signs of calmness after a volatile week in which a political scandal hit Brazilian president Michel Temer and caused the country’s financial markets to tumble. Sugar also dropped before rebounding along with Brazilian markets on Friday.
Over the weekend, Mr. Temer denied any wrongdoing and demanded that the senate end the investigations against him, despite mounting calls for his impeachment. Brazil’s Ibovespa stock index was down 1.8%, and the real also weakened 0.5% against the U.S. dollar.
A weaker real helps sugar mills in Brazil fetch more revenue in local-currency terms. “Many mills with professional financial management increased their fixations for 2018/2019 a little, taking advantage of the sudden hike of the dollar in face of the political turbulence,” wrote Arnaldo Luiz Correa, a consultant at Archer Consulting, in a note to clients.
On the other hand, Monday’s gains were also underpinned by wet weather expected over the weekend in central-south Brazil cane areas. Forecasts for the second half of May are for more than double the average rainfall over the two-week period, and this will cause delay both in harvesting and in shipping from the ports should they be affected, according to Sucden Financial Research.
Global production for the current marketing year is up 9 million tons to a record 180 million tons, but stocks are down 2% to 38 million tons, as lower stocks in China and Mexico more than offset higher stocks in Pakistan, according to the U.S. Department of Agriculture. This drawdown, plus record exports, will support relatively flat consumption at 172 million tons.
In other markets, cocoa for July added 0.4% to close at $2,035 a ton, arabica coffee for July was off 1.1% to settle at $1.3060 a pound, frozen concentrated orange juice for July lost 2.6% to end at $1.3605 a pound, and July cotton fell 1.3% to settle at 78.39 cents a pound.