Surging Brazil Currency Helps Lift Sugar and Coffee Futures Cole Martin A surprise lead for Flávio Bolsonaro in Brazil’s first round of the presidential election sent the nation’s currency soaring, helping lift prices of the biggest soft commodities exports from South America’s agricultural powerhouse. Raw sugar futures rose as much as 4.4% to hit their highest level since December 2024, while arabica coffee futures rose as much as 3.8%. The gains tracked the Brazilian real’s surge of as much as 5% against the US dollar, the currency underpinning the contracts. Brazil is the world’s largest grower of both crops, and a stronger local currency can discourage farmer selling unless the US dollars they receive rise in tandem.
"The Brazilian real is strong today, which is a nice bullish tailwind for agriculture markets," said Dave Whitcomb, founder of Peak Trading Research. "There’s also a sense that funds might have shed too much length given all the Brazil risk ahead of us." Investors had widely expected left-wing incumbent Luiz Inácio Lula da Silva to exit the first round of voting ahead, but the right-wing senator Bolsonaro is now the front-runner to win the Oct. 25 presidential runoff after taking 47% of the early vote. Bolsonaro is seen as more market-friendly and more likely to cut public debt, which supports the real. The strengthening real is compounding other price supports, particularly in raw sugar. The sweetener rose more than 5% on Friday, which "was indicating that the market would continue the rally today" even before the spike for Brazil’s currency, said Brazil-based Stone X analyst Marcelo Bonifacio.
Meanwhile, an intensifying El Niño is already hurting top sugar producers, including with excessive rainfall that has slowed cane harvesting in Brazil. Prices surged from below 14 cents a pound in June to more than 20 cents a pound on Monday as analysts increasingly expect a deficit over the 2026-27 season and as speculators, who pared back shorts over the week ended Sept. 29, piled into bullish bets."It seems the market is convinced that sugar will fall well short of early and recent estimates," Green Pool Global analysts wrote in a Monday note, cutting their Center-South Brazil sugar output forecast for the current season by 3%. Coffee meanwhile has pared back some of Monday’s biggest gains, after analysts at Hedgepoint Global Markets estimated a global surplus of 8.9 million bags for the current crop year."For the first time in years, the numbers point to a market with more room to breathe," Hedgepoint Chief Commercial Officer Carlos Costa said in a statement. "Brazil is recovering, and a global surplus is beginning to take shape."
Source: Bloomberg Markets · Summarized by HeadlinesBriefing