Investing.com - U.S. soft futures were broadly higher during early U.S. morning trade on Wednesday, with coffee and sugar prices rallying sharply as investors entered the market ahead of a policy-setting meeting by the Federal Reserve on Thursday, amid hopes for more stimulus.
Farm commodities received a boost from outside market influences on Wednesday, as appetite for riskier assets strengthened after Germany’s constitutional court approved the country’s participation in the euro zone’s permanent bailout fund earlier in the day.
Meanwhile, markets continued to eye the outcome of the Fed’s policy meeting on Thursday, amid fresh speculation that the U.S. central bank may announce a third round of bond purchases, or quantitative easing, to boost growth.
Past monetary stimulus rounds weakened the U.S. dollar, boosting the price of dollar-denominated commodities.
The risk-on trade environment prompted investors to shun traditional safe haven assets such as the U.S. dollar and move in to riskier assets such as commodities and stocks.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.22% at 79.83, the weakest level since May 4.
A weaker dollar boosts the appeal of U.S. commodities to overseas buyers and makes raw materials more attractive as an alternative investment.
On the ICE Futures U.S. Exchange, Arabica coffee for December delivery traded at USD1.7862 a pound, jumping 1.1%. It earlier rose by as much as 1.15% to hit a session high of USD1.7868 a pound.
The December contract rallied to USD1.7997 a pound on Tuesday, the highest since July 24, as traders continued to close out bets on lower prices after futures moved into oversold territory.
December coffee prices rallied nearly 12% in the three sessions leading up to Wednesday, as market players closed out bets that prices would fall as they begin to look ahead to next season's crop.
Technical traders said the market was oversold and due for a technical bounce. December coffee prices touched a two-and-a-half-month low of USD1.5560 a pound on September 6.
Coffee prices have been under pressure in recent weeks, as receding concerns over the impact of adverse weather conditions on crops in key growing regions in Brazil dampened the appeal of the commodity.
The Brazilian Arabica harvest is now in its final stages.
Brazil is the world’s largest producer and exporter of Arabica coffee. Arabica is grown mainly in Latin America and brewed by specialty companies.
Meanwhile, sugar futures for October delivery traded at USD0.1983 a pound, surging 2.1%. The October contract rose by as much as 2.3% earlier to hit a daily high of USD0.1988 a pound, which was the strongest level since September 4.
Sugar prices continued to recover from a two-year low hit on September 6, as technical buying and bargain hunting supported prices, though gains were expected to be limited.
Sentiment on the sweetener has been downbeat in recent weeks, losing nearly 17% since mid-July amid easing concerns over the pace of the harvest in Brazil’s Center South region.
Brazil’s top sugar industry group Unica said Tuesday that sugar output in Brazil’s Center South region rose 12.4% in the second half of August, as perfect weather conditions aided the harvest.
Sugar production rose to 3.34 million metric tons between August 16and August 31 from 2.66 million tons a year earlier.
Sugar-cane growers harvested 44.2 million tons in the period, up 14% from 38.7 million tons a year earlier.
Sugar prices rallied to a four-month high of USD0.2398 a pound on July 20, as fears that heavy rains in Brazil could damage sugarcane crops in the country’s center-south region boosted sentiment on the sweetener.
Brazil’s center south-region produces nearly 90% of the nation’s sugar. The South American country is the world’s largest sugar producer and exporter, with the USDA estimating the nation accounts for nearly 20% of global production and 39% of global sugar exports.
Elsewhere, cotton futures for October delivery traded at USD0.7481 a pound, adding 0.7%. The front-month contract was stuck in a tight trading range of USD0.7455 a pound, the daily low and a session high of USD0.7506 a pound.
Cotton traders were looking ahead to the release of a key monthly U.S. Department of Agriculture report on U.S. cotton supplies later in the day to gauge the strength of global demand for U.S. supplies.
Farm commodities received a boost from outside market influences on Wednesday, as appetite for riskier assets strengthened after Germany’s constitutional court approved the country’s participation in the euro zone’s permanent bailout fund earlier in the day.
Meanwhile, markets continued to eye the outcome of the Fed’s policy meeting on Thursday, amid fresh speculation that the U.S. central bank may announce a third round of bond purchases, or quantitative easing, to boost growth.
Past monetary stimulus rounds weakened the U.S. dollar, boosting the price of dollar-denominated commodities.
The risk-on trade environment prompted investors to shun traditional safe haven assets such as the U.S. dollar and move in to riskier assets such as commodities and stocks.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.22% at 79.83, the weakest level since May 4.
A weaker dollar boosts the appeal of U.S. commodities to overseas buyers and makes raw materials more attractive as an alternative investment.
On the ICE Futures U.S. Exchange, Arabica coffee for December delivery traded at USD1.7862 a pound, jumping 1.1%. It earlier rose by as much as 1.15% to hit a session high of USD1.7868 a pound.
The December contract rallied to USD1.7997 a pound on Tuesday, the highest since July 24, as traders continued to close out bets on lower prices after futures moved into oversold territory.
December coffee prices rallied nearly 12% in the three sessions leading up to Wednesday, as market players closed out bets that prices would fall as they begin to look ahead to next season's crop.
Technical traders said the market was oversold and due for a technical bounce. December coffee prices touched a two-and-a-half-month low of USD1.5560 a pound on September 6.
Coffee prices have been under pressure in recent weeks, as receding concerns over the impact of adverse weather conditions on crops in key growing regions in Brazil dampened the appeal of the commodity.
The Brazilian Arabica harvest is now in its final stages.
Brazil is the world’s largest producer and exporter of Arabica coffee. Arabica is grown mainly in Latin America and brewed by specialty companies.
Meanwhile, sugar futures for October delivery traded at USD0.1983 a pound, surging 2.1%. The October contract rose by as much as 2.3% earlier to hit a daily high of USD0.1988 a pound, which was the strongest level since September 4.
Sugar prices continued to recover from a two-year low hit on September 6, as technical buying and bargain hunting supported prices, though gains were expected to be limited.
Sentiment on the sweetener has been downbeat in recent weeks, losing nearly 17% since mid-July amid easing concerns over the pace of the harvest in Brazil’s Center South region.
Brazil’s top sugar industry group Unica said Tuesday that sugar output in Brazil’s Center South region rose 12.4% in the second half of August, as perfect weather conditions aided the harvest.
Sugar production rose to 3.34 million metric tons between August 16and August 31 from 2.66 million tons a year earlier.
Sugar-cane growers harvested 44.2 million tons in the period, up 14% from 38.7 million tons a year earlier.
Sugar prices rallied to a four-month high of USD0.2398 a pound on July 20, as fears that heavy rains in Brazil could damage sugarcane crops in the country’s center-south region boosted sentiment on the sweetener.
Brazil’s center south-region produces nearly 90% of the nation’s sugar. The South American country is the world’s largest sugar producer and exporter, with the USDA estimating the nation accounts for nearly 20% of global production and 39% of global sugar exports.
Elsewhere, cotton futures for October delivery traded at USD0.7481 a pound, adding 0.7%. The front-month contract was stuck in a tight trading range of USD0.7455 a pound, the daily low and a session high of USD0.7506 a pound.
Cotton traders were looking ahead to the release of a key monthly U.S. Department of Agriculture report on U.S. cotton supplies later in the day to gauge the strength of global demand for U.S. supplies.