(Bloomberg) -- Raw sugar futures extended last week’s gains as analysts raise deficit forecasts after fires in Brazil.
The most-active contract in New York rose as much as 2% Tuesday, after rallying more than 5% last week. Fires in Brazil that impacted cane crops amid the country’s worst drought in four decades put the world on track for a larger-than-expected shortfall.
Damages from the fires, as well as poorer quality cane due to heat and drought, mean the country’s key Center-South region is expected to produce less than expected, said Ana Zancaner, an analyst at Czarnikow. A heat wave hitting Brazil also adds to below-average rains that are damaging the cane and limiting mills’ ability to produce sugar, Zancaner added.
“The sugar mix has been very disappointing,” she said. “Brazilian mills added capacity to produce sugar, but the quality of the cane is not there. Mills are not able to use that additional crystalization capacity.”
Global sugar production could now fall short of consumption by 600,000 tons in the 2024/25 season — double an August forecast, said Claudiu Covrig, lead analyst at Covrig Analytics.
Meanwhile, robusta coffee rebounded in London, rising as much as 3.7% amid lingering concerns about tight supplies. Futures had hit a fresh intraday high of $5,180 a ton last Friday, before slumping on Monday when US markets were closed.
Robusta’s rally to the highest since the 1970s has also narrowed its discount to arabica, the type favored by chains like Starbucks Corp. The spread last week was at the smallest in data going back to 2008, according to figures compiled by Bloomberg.
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