By Marvin G. Perez
While raw sugar and arabica coffee are trading near four-year highs amid bets that dryness in Brazil will cut yields, it’s too early to assume final harvest results for the world’s top supplier, analysts at Rabobank led by Carlos Mera, say in a report.
Brazilian sugar output slid 36% in the first half of April, but “it’s always difficult to assess the real size of the crop from the beginning of the harvest” and “the peak should be a more reliable indicator”
Drier weather next 10 days is also good to boost harvest, supply, he says.
Speculators probably encouraged by a “soft’ outlook for USD in 2021 that makes it cheaper for buyers holding foreign currencies.
“Some negative surprises in the Brazilian harvest could result in a lower surplus in 2021-22, but the fact still remains that global sugar stocks are bulky from previous surpluses”
Brazilian mills will likely maximize use of cane to make sugar versus ethanol.
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For arabica, main determinant for the 2022-23 Brazilian crop will be the flowering around September; normal weather that month could boost blossoms and cause a drop in prices, assuming no major troubles in other arabica-producing countries.
In the robusta market, high freight rates across Asia are limiting supply from the region, boosting demand of the variety from other countries such as Uganda and Brazil, Rabobank says.
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