The turmoil gripping Brazil is leaving sugar traders reeling.
Prices in New York jumped as much as 4.8 percent on Wednesday, the biggest intraday gain in almost a month. Gains for the Brazilian real are threatening exports from the country, the world’s top grower and shipper. Because the supplies fetch dollars in return, a stronger South American currency leaves millers less willing to sell.
As Brazil’s Senate gears up for a vote that could oust the president, the strife is rippling its way through to the commodity markets. For the Bloomberg Sugar Subindex, a gauge of futures returns calculated to smooth out rollovers, 60-day volatility climbed to the highest since November 2011. The real has gained about 14 percent against the dollar this year.
“The last three weeks, it’s been a tremendously volatile market,” Tracey Allen, an analyst at Rabobank in London, said by phone. “A lot of that is attributed to the shifts in FX we’re seeing, particularly around the process of impeachment."
Raw sugar for July delivery rose 4 percent to 16.66 cents a pound at 11:34 a.m. on ICE Futures U.S. in New York. The price earlier touched 16.79 cents, the highest since an 18-month high of 16.87 cents reached on May 5.
The commodity also gained on concerns over supplies in Asia, Allen said. Dryness is expected to continue in growing regions of Thailand, Vietnam, India and Pakistan, where crops are in the early stages of cane growth, according to a report e-mailed Tuesday by MDA Weather Services. Global supplies will trail demand by 4.9 million metric tons in the 12 months that start Oct. 1 in most countries, up from an earlier estimate for a deficit of 1.5 million tons, Ratzeburg, Germany-based F.O. Licht said last month.
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