Coffee and Cocoa after an initial decline last week saw sharp incline of prices due to concerns about crop yield due to dry weather forecasts. Meanwhile, Sugar prices too climbed up this week after declining initially due to concerns that the cold weather forecasts might damage the sugar crops.

Last week on Wednesday, the September contract for cocoa climbed 0.6% to $2,402 a tonne on ICE Futures in New York, US.Meanwhile, Robusta coffee for September declined by 0.1% to $1,879 a tonne on the NYSE Liffe, but the Arabica Coffee for the same contract advanced by 0.7% to $1.187 a pound on ICE. Sugar for the October delivery too dropped by 0.1% to $0.1653 a pound.

On Friday, Coffee climbed higher by 0.7% to $1,922 a tonne, its highest since July 26. In line with this trend, the Arabica Coffee futures for September too edged up by 0.4% to $1.225 a pound today. In contrast, Cocoa for September delivery declined 0.8% to $2,458 a tonne on ICE. Meanwhile, Sugar for October delivery increased by 0.4% to $494.90 a tonne in London.

The dry weather forecasts for West Africa had fuelled the concerns about cocoa crop damage resulting in a reduction in the yield. This caused its prices to initially climb up. The Robust Coffee prices short up because of market backwardation.

Market backwardation is a situation where the future contracts with earlier delivery dates are higher than the contracts with later delivery dates. This, signals at a possible supply crunch in the market, making delivery of front month contracts difficult. As is the case, data showed that traders had been tapping into the stockpiles in Europe during August.

On Tuesday this week, Raw Sugar for October delivery advanced by 0.5% to $0.1724 a pound on ICE Futures. This after it reached a high of $0.1729 a pound, its highest since June 27. Cocoa for the December delivery dropped by 0.9% to $2,476 a tonne on ICE. In contrast, Coffee for December delivery climbed by 0.2% to $1.2635 a pound in New York, with Arabica coffee for December too gaining by 0.2 % to $1.2635 a pound.

Sugar prices climbed to a six week high in New York in the past few days. This is because Brazil, the World’s largest producer has been reported to be more inclined towards ethanol production rather than exporting raw sugar. According to industry group Unica in Sao Paulo, millers in the center South region of Brazil, its main producing region, utilized around 55% of sugar cane to produce ethanol in the second half of July. This was against the 49.4% utilization in the last year.

Moreover, the Cold weather front forecasted for Brazil is speculated to affect the sugar crops and reduce their yield. With millers already channeling a large portion of sugar crops into ethanol production, this further cast concerns about supply form the world’s largest producer. This drove up the sugar prices.