Sugar Futures Tumble to Lowest Since 2010 While Coffee Plunges

(Bloomberg) – Signs of bigger supplies sent sugar and coffee prices tumbling as rains improve harvest prospects in Brazil, the world’s top grower and exporter of both crops.

Sugar dropped to the lowest since May 2010 on Tuesday, and coffee plunged more than 6 percent to post the biggest loss in more than four years. Showers across most of Brazil’s growing regions last month helped replenish soil parched by dry weather in January. The brighter production outlook comes as India is poised to export more sugar and farmers gather larger coffee crops in Latin America.

Brazil’s weaker currency is adding to supply woes as exporters race to sell more commodities that fetch dollars in return. The real fell for six straight months against the greenback. Orange-juice futures slumped more than 7 percent in New York Tuesday. The South American country is also the biggest citrus grower.

“The real keeps pounding coffee, sugar and orange juice prices,” Jack Scoville, a vice president at Price Futures Group in Chicago said in a telephone interview. “The weather continues to show potential for more rains, and that could improve the chances for production.”

On ICE Futures U.S., raw sugar for May delivery fell 1.4 percent to settle at 13.45 cents a pound at 1 p.m. in New York. The price touched 13.38 cents, the lowest since May 7, 2010.

Above-average rains in Brazil’s Center South, the main sugar region, mean the cane crop will be as much as 2.6 percent bigger than last year, according to Julio Maria Borges, a partner at consultant JOB Economia e Planejamento.

India Subsidy

Government support will encourage sugar exporters to ship more from India, the second-biggest producer. The nation will give a cash subsidy to help mills reduce stockpiles and pay debts owed to farmers. The top-producing state of Maharashtra is considering additional aid above what will be paid by the federal government.

The gains in supply come at a time when some consumers are looking to eat fewer sweets. General Mills Inc., maker of Cheerios cereal, will reduce sugar use in some products to reflect that “values are changing for consumers,” Chief Executive Officer Ken Powell said at a Feb. 17 conference.

Arabica-coffee futures for May delivery slumped 6.2 percent to $1.2975 a pound on ICE, the biggest loss for most-active contract since August 2010.

In Peru, coffee suppliers will probably ship about 19 percent more this year than a year earlier, according to Eduardo Montauban, the general manager of the National Chamber of Coffee and Cocoa Exporters. The country is South America’s third-largest grower, trailing Brazil and Colombia.

“The Peru story probably added pressure to prices,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “There’s nothing bullish about supplies.”