By Marvin G. Perez
Raw sugar and arabica coffee fell on bearish signals in currency markets in Brazil, the world’s top exporter of the commodities, and signs of muted demand in the U.S. amid the coronavirus outbreak.
Banco do Brasil on Wednesday cut its the benchmark rate by 75 basis points to 2.25%, the eighth straight reduction. On Thursday, the bank said its economic activity index for April, a proxy for gross domestic product, tumbled 15% y/yr. Policy makers said uncertainty on a 2H recovery is “larger than usual.” The real’s weakness against the dollar boosts the appeal of exports priced in the greenback.
In the U.S., applications for unemployment benefits last week fell less than forecast, showing only gradual improvement from the worst of the pandemic-related layoffs
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Raw sugar for October delivery fell 0.6% to 12.19c/lb on ICE Futures U.S. in New York
Arabica-coffee futures for October delivery declined 1.2% to 96.95c/lb, heading for the seventh drop in eight sessions
With a combination of ample supply and typically lower seasonal demand, “13 of 14 years, coffee prices make new lows headed into July-August,” Judy Ganes, the president of J. Ganes Consulting, said in an email: “Given the Brazil crop prospects are strong, there isn’t much fundamental justification to suggest that this year will buck the down-seasonal” trend, and “stocks are building”
For sugar, “BRL/USD exchange rate and crude-oil prices will remain a key factor to watch in coming weeks,” research co. F.O. Licht said in a report
“There was support from firming crude oil prices, while the Brazilian real is showing renewed weakness, which is usually bearish”
Other soft commodities
Cocoa climbed after touching a 12-week low, and orange juice declined for the fourth time in five sessions
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