(Bloomberg) – Commodities slumped to a five-year low led by agriculture items produced by Brazil on speculation a slump in the country’s currency will fuel exports.
The Bloomberg Commodity Index dropped 0.6 percent at 11:03 a.m. in London after falling to the lowest since July 2009. Raw sugar futures fell 2.3 percent and arabica coffee declined 1.4 percent. Brazil is the biggest producer of both commodities.
Brazil President Dilma Rousseff’s re-election damped speculation for a change in policies, sending the real down 3.2 percent today, the biggest decline since 2011. The real weakened 33 percent against the dollar since Rousseff took office in January 2011. Declines in the Brazilian currency tend to encourage export sales of products traded in dollars.
“We’re basically back to 2009 when the world was facing recession and a dramatic slump in demand,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “A weak real would make Brazil more competitive for key commodities such as soybeans, iron ore and soft commodities such as coffee and sugar on the export market.”
Raw sugar dropped to 15.99 cents a pound, the lowest since Oct. 2. Arabica coffee declined to $1.88 a pound and soybeans retreated 0.7 percent to $9.765 a bushel. Brazil is the biggest exporter of all three. Soybeans slumped 24 percent this year on a record harvest in the U.S.
The focus for soybeans is switching from the record U.S. crop to prospects for demand and production in South America, Hansen said. “Those stories could create some suport in the market,” he said.
