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Arabica, sugar rallies on heels of Brazilian currency

 Arabica coffee futures on ICE surged 4 percent and raw sugar flirted with a 2012 high
on Tuesday, as the currency in top grower Brazil rallied to an 11-month peak and as broad-based buying flowed into commodity
markets.
    Cocoa prices were little changed as the British pound  bounced up slightly from the 31-year low it hit on Monday after
tumbling when Britain voted to leave the EU. 
    September arabica settled up 4.55 cent, or 3.3 percent, at $1.406 per lb, after soaring 4 percent to $1.4155.
    "The currency has a lot to do with it. The real is soaring," one U.S. trader said.
    The Brazilian currency, the real, rose to its highest against the U.S. dollar since July 2015, joining other Latin
American currencies as investors scooped up bargain assets.
 
    The strong real discourages producer selling of coffee and sugar in Brazil.
    September robusta settled up $37, or 2.22 percent, at $1,701 per tonne, underpinned by expectations that Vietnamese
robusta exports could slow down.
    "It would make sense for the Vietnamese to hold off (on shipments)," said Shweta Upadhyaya, agricultural commodities
analyst with Agrimoney, referring to expectations for tight supplies.
    Upadhyaya spoke of concerns over the quality of the arabica harvest in Brazil after heavy rainfall in May, which could
tighten availability of higher quality beans on the export market.
    Dry weather in producers such as Vietnam, Indonesia and India has eroded supply prospects for next season.
    Commerzbank said in a note: "The robusta price will doubtless perform better on the back of (this) tighter supply,
and should achieve $1,700 per tonne by the end of the year."
    October raw sugar settled up 0.3 cent, or 1.5 percent, at 19.94 cents per lb.
    The July/October spread SBN6-V6 was little changed at a discount around 0.13 cent ahead of the July contract's 
expiry on Thursday.
    Dealers said expectations of a delivery are around 1 million tonnes of mainly Brazilian sugar. 
    August white sugar settled up $6.50, or 1.2 percent, at $548.10 per tonne, after touching a contract high of $553.10.
    London September cocoa settled up 3 pounds, or 0.1 percent, at 2,364 pounds per tonne, after rising to 2,374
pounds, equaling Monday's peak, the highest for the second position since March 2011.
    "We expect volatility to decline and prices to reverse over the coming quarters as we believe the lower 2015-16 output has
already been priced in," said BMI Research in a client note.
    New York September cocoa settled up $20, or 0.7 percent, at $3,006 per tonne.

(Reuters) 

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