Raw Sugar Rebounds in New York After Brazil Raises Interest Rate

(Businessweek) – Raw sugar and arabica coffee futures rebounded in New York after Brazil raised the benchmark lending rate, boosting prospects for a stronger real and slower growth in commodity exports.

Brazil raised the benchmark Selic (BZSTSETA) rate by 50 basis points to 8.5 percent, as forecast by all 51 analysts surveyed by Bloomberg. It’s the third consecutive increase. The Brazilian real weakened to a four-year low yesterday, creating an incentive for exports sold in the U.S. currency.

“If the real appreciates against the U.S. dollar, we may potentially see incentive for sugar producers to limit their sales,” said Tracey Allen, an analyst at Rabobank International in Sydney. “There’s still a lot of sugar to be sold in Brazil and elsewhere, so the market is still going to be pressured.”

Raw sugar for October delivery rose 0.1 percent to 16.27 cents a pound at 5:20 a.m. on ICE Futures U.S. in New York. Prices fell 0.6 percent yesterday to 16.25 cents a pound, the lowest settlement for a most-active contract since June 2010. Arabica coffee futures jumped 1.3 percent to $1.2325 a pound.

Brazil center-south mills processed 29.1 million metric tons of sugar cane during June 16-30, down 8.2 percent from a year earlier, industry group Unica said in a report yesterday.

“The current weather is the focus and there doesn’t appear to be any significant rain in sight,” said Michael McDougall, head of the Brazil trading desk at Newedge Group in New York.“Rain now would be bullish for prices.”

White, or refined, sugar fell 0.8 percent to $466.70 a ton in London.

Robusta coffee climbed 0.6 percent to $1,883 a ton. Cocoa in London advanced 0.7 percent and rose 1.7 percent in New York.