World coffee and sugar prices soared to new highs on Thursday as drought conditions in Brazil, the leading producer of both commodities, continue to create uncertainty in the market. Brazil is experiencing one of its worst droughts on record, leading to farmland fires in sugar-producing regions and severely affecting arabica coffee during its critical flowering phase.
Analysts from LSEG indicate that while some weather models suggest that rains may arrive in Brazil, they are not expected until mid-to-late October, if they come at all. The overall forecast remains largely negative, with only a slight chance of relief towards the end of the month.
Benchmark arabica futures reached a 13-year high of $2.7505 per pound, closing up 1.8% at $2.739/lb. Meanwhile, raw sugar futures hit a fresh seven-month peak of 23.71 cents per pound, closing slightly lower at 23.31 cents/lb. Speculators, facing the prospect of Brazil entering one of its longest periods between crops in decades, have shifted their strategies, covering short positions in the sugar market.
In contrast, robusta coffee prices in Vietnam fell ahead of the new harvest, although adverse weather earlier this year is expected to impact the upcoming crop. Robusta futures rose 1.5% to $5,527 a ton, reflecting ongoing volatility in the market.
In other soft commodities, white sugar futures declined by 0.5% to $593.90 a ton, while cocoa futures also saw gains, with December New York cocoa rising to $8,122 a ton.