Sugar and coffee both rallied after Brazil's currency ripped higher. Raw sugar climbed as much as 4.4% to a new peak not seen since late 2024, while arabica coffee rose up to 3.8%. Those contracts are priced in dollars, and the real's intraday jump of as much as 5% helped power the move.
The political spark: a first-round surprise with right-wing senator Flávio Bolsonaro taking 47% of early votes and heading to a presidential runoff on Oct. 25. Most traders expected Luiz Inácio Lula da Silva, the sitting left-wing leader, to top the first round. Bolsonaro is viewed as more favorable to markets and as someone who would focus on lowering public debt, a combo that strengthened the real.
The currency pop added to momentum already building in sugar. The contract rallied more than 5% on Friday, which "was indicating that the market would continue the rally today" even before the real surged, said Brazil-based StoneX analyst Marcelo Bonifacio.
Supply is getting pinched too. A strengthening El Niño is disrupting top sugar regions, including heavy rains that have slowed cane harvesting in Brazil. Since June, prices have climbed from under 14 cents per pound to above 20 cents on Monday as more analysts anticipate a 2026-27 deficit, and as speculators who trimmed shorts in the week ended Sept. 29 shifted into bullish positions.
Political surprises reprice a currency faster than any economic release. Market Briefs tracks emerging market FX free every weekday.
Coffee's early pop faded somewhat later on Monday as Hedgepoint Global Markets said the current crop year could see the balance tip to a 8.9 million bags surplus worldwide. "For the first time in years, the numbers point to a market with more room to breathe," said Carlos Costa, Chief Commercial Officer at Hedgepoint. "Brazil is recovering, and a global surplus is beginning to take shape."
Traders were also watching fund flows. "The Brazilian real is strong today, which is a nice bullish tailwind for agriculture markets," said Dave Whitcomb, founder of Peak Trading Research. "There's also a sense that funds might have shed too much length given all the Brazil risk ahead of us."
Brazil is the world's biggest producer of both sugar and arabica coffee, and a stronger real can make farmers less eager to sell unless their dollar receipts rise too. Layer on tricky weather and shifting speculative bets, and you get a recipe for choppy prices. If you hold exposure tied to these crops, expect the political calendar, rainfall patterns, and currency moves to matter as much as the harvest.
Brazil's politics and its real have been moving together all year. Join Market Briefs free and follow the swings.
