Arabica coffee gains more than 6% on frosts in Brazil, sugar rises 2%

RIO DE JANEIRO, BRAZIL – Arabica coffee futures on ICE closed up more than 6% on Tuesday, buoyed by fears of crop damage after frosts hit production areas of major producer Brazil for the second time this year.

Sugarcane fields in Brazil may also have been affected by frosts.

COFFEE

Arabica coffee for September closed up 10.4 cents, or 6.6%, at US$1.668 a pound, just off a 4 1/2-year high.

Robusta coffee for September delivery closed up US$29, or 1.7%, at US$1,761 a ton, hitting a three-year high of US$1,793.

Operators and analysts said there were renewed reports of frost in coffee areas overnight, the second time in less than a month.

They said frosts, this time hit farms in major coffee areas such as the states of Minas Gerais and São Paulo harder.

“The market is now trying to assess the damage. This is the first time we have seen frost in a significant part of the coffee belt,” said Rabobank analyst Carlos Mera.

Coffee plants are susceptible to frosts, which kill leaves and damage the production potential of the next crop.

“As far as I know, some areas are severely affected. The market is quite sensitive to the highs, and the ‘forward spreads’ (spreads between the continuing contracts and spot) are also reacting positively,” said US Soft analyst Paul Daly.

SUGAR

White sugar for October delivery rose 0.34 cents, or 2%, to 17.41 cents per pound.

Frost hit some sugar cane fields in São Paulo state this morning in Brazil. However, analysts said it could take a few days to determine the extent of the damage.

Brazil, the largest sugar producer, already has a smaller sugarcane crop this year due to drought, and the frosts are expected to affect production further.

White sugar for October delivery closed up US$5.50, or 1.2%, at US$449.30 per ton.