The prices of agricultural commodities like coffee, sugar and cocoa are on a steady rise from last week. The poor weather forecasts for the regions that are the top producers of these crops have caused supply concerns for these commodities. This has in turn resulted in a sharp incline in their market prices.

Last week on Thursday, the raw sugar for the October delivery advanced by 0.5% to $0.1616 per pound on the U.S ICE Futures. This was after hitting a session high of $0.1629 a pound. Whereas, the White Sugar for October delivery too rose by 0.6% to $462.50 a tonne on the NYSE Liffe in London. Meanwhile, the Arabica coffee for September delivery climbed up by 1.5% to $1.2913 per pound, with Robusta coffee too gaining by 0.1% to $1,952 a tonne in London.

In line with this trend the Cocoa prices too shot up by 0.8 percent to $2,319 a tonne in New York. On Friday, the frigid weather forecasts pushed the Arabica coffee price for September delivery by 1.2% to $1.2905 a pound in the U.S ICE Futures. While, the Robusta coffee for September delivery advanced by 0.9 % to $1,987 a metric tonne on the NYSE Liffe in London.

Starting this week on Monday, Sugar extended its gains as the October contract on U.S. ICE Futures traded advanced up by 1% to $0.1645 a pound. This was after a session high of $0.1648 a pound, its highest since July 3. While, the Arabica Coffee continued to edge up as it rose by 1% to $1.2398 a pound for the September delivery in ICE Futures U.S. Whereas, Cocoa pared back its gains as it dropped by 0.6 % to $2,351 a metric tonne in New York.

On Tuesday, the White sugar for October delivery in ICE Futures edged up by 0.5% to $474.50 a tonne on NYSE Liffe. While, the Robusta coffee for the September delivery climbed by 0.5 % to $1,954 a metric tonne on NYSE Liffe. Following this trend, the cocoa for September delivery gained 0.7 percent to $2,365 a tonne in New York.

Analyzing the reasons for the steady uptrend in the prices of Sugar and coffee, we find that the harsh weather forecasts for these crops in the top producer regions pushed up the prices. Since last week, the weather forecasts for Brazil, the top producer of both Coffee and sugar crops, has been quite gloomy. The weather forecaster Somar Meteorologia is predicting a cold front for Brazil, which will bring rains that can potentially disrupt the harvest of sugar crops.

Meanwhile, the MDA Weather Services predicts frigid climate for the southern Coffee regions of Brazil. The frost being a big negative for the growth of Coffee beans, it might potentially reduce the harvest yields. Similar weather concerns too pushed up the Cocoa prices.

Moreover, Bernanke’s comments that dispelled the fears of an early QE tapering by September have strengthened the Brazilian Real. Since a strong Real reduces the export prices for Sugar and coffee in US dollar, the Brazilian farmers generally export less. All of these weighed on the supply concerns for these crops and drove up their prices.

Meanwhile, the Corn prices slipped on positive weather forecasts for the US region. According to the MDA Weather Services, good amount of rains and lower temperatures are expected, which is bound to be favorable for the Corn crops. On Wednesday this week, corn for the December delivery in CBOT plunged by 1.5% to $4.9075 a bushel, its lowest level since July 8.

Whereas, the Wheat prices though concerned by good weather forecasts, was pushed up by a strong demand from China. The September delivery for Wheat on the CBOT advanced by 0.4 % to trade at $6.6663 a bushel.

However, the Commodity Weather Group forecast predicting cool temperatures for next two weeks in Midwest Us is bound to put some downward pressure on the Wheat and Corn prices. Meanwhile, the reports from Brazil suggest that the Coffee and Sugar crops seem to have escaped the frigid weather forecasts, easing the concerns for crop damage. So, the rally in Coffee and Sugar prices might be tested in the coming days with better weather forecasts in future.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.