Traverse City Record-Eagle

Business

August 3, 2013

Futures File: Sugar pops on scare of a Brazilian freeze

Sugar prices jumped to a one-month high this week on fears that the Brazilian sugarcane crop could be damaged by frost. Estimates that as much as one-fifth of the crop in affected areas in Southern Brazil could be lost caused global prices to rally by as much as 0.61 cents per pound (+3.7 percent). Although sugar is produced worldwide, either by cool-weather sugar beets or tropical sugarcane, Brazil is the world’s predominant exporter, accounting for nearly half of all sugar exports.

Global sugar demand is expected to mark a new record high, but production is expected to drop, tightening the global supply. Despite the bullish setup, sugar prices are still down more than 50 percent from their recent high of 36 cents per pound in 2011. As of Friday, sugar for delivery in October was worth 16.86 cents.

Australian dollar down,under pressure

Until recently, Australia had been a favorite for international investors due to its abundance of commodities, a stable political system, and close proximity to rapidly developing Asian nations, all of which kept Australia recession free during the last twenty years.

Alongside its strong economy, Australia had some of the highest interest rates for developed nations, currently at 2.75 percent compared to rates under 0.5 percent in Europe, the US and Japan. This made Australia a favorite destination for investors looking to get higher rates, helping to further fuel the Aussie economy.

Unfortunately, a slowing Chinese economy has led to stagnating prices for major Australian exports like wheat, copper, coal, iron, and gold, hurting Australia’s economy as well. This has prompted Australia to lower interest rates to stimulate its economy, an unwelcome sign for foreign investors. As a result of the slowdown and lower rates, traders have dumped the Australian dollar in the last three months, causing the “Aussie” to drop by over 16 percent to three-year lows at 88.44 cents per US dollar on Friday.

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