A prolonged drought in Brazil is decimating crops, with sugar exchange traded funds testing their short-term trends as sugar futures post their best rally in almost five months.
The iPath Dow Jones-AIG Sugar Total Return Sub-Index ETN (NYSEArca: SGG) gained 9.2% over the past week while iPath Pure Beta Sugar (NYSEArca: SGAR) rose 8.3% and Teucrium Sugar Fund (NYSEArca: CANE) increased 6.8%. The ETFs are now trading around their 50-day exponential moving averages.
Sugar futures are hovering around $15.9 per pound after touching a one-month high Wednesday.
MDA Weather Services expects dry weather over the next 10 to 15 days in Brazil could exacerbate drought conditions, Bloomberg reports.
According to Somar Meteorologia, Brazil is suffering from its hottest January on record with rainfall for the month at a 20 year low.
Brazil is one of the largest commodity producers as 20% of the country’s workforce engages in agriculture, and over a quarter of the country’s exports earnings come from agricultural goods. Due to its affect on global agriculture supply, a shift can send waves through agricultural prices, writes Daniela Pylypczak for Commodity HQ.
The record heat in Brazil has been affecting coffee production, with coffee futures skyrocketing. The iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (NYSEArca: JO) has gained 22.0% over the past week and is up 31.2% year-to-date. [Wake Up and Smell the Coffee ETN]