Commodities Drop to Five-Year Low Led by Gasoline, Sugar

Commodities slumped to a five-year low led by gasoline and agriculture products grown in Brazil on speculation a slump in the country’s currency will fuel exports.

The Bloomberg Commodity Index dropped 0.6 percent at 1:56 p.m. in London after falling to the lowest since July 2009. Raw sugar futures fell 1.6 percent and soybeans dropped 0.4 percent. Brazil is the biggest exporter of both commodities.

Brazil President Dilma Rousseff’s re-election damped speculation for a change in policies, sending the real down 2.1 percent today. The real weakened 33 percent against the dollar since Rousseff took office in January 2011. Declines in the Brazilian currency tend to encourage export sales of products traded in dollars.

“We’re basically back to 2009 when the world was facing recession and a dramatic slump in demand,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “A weak real would make Brazil more competitive for key commodities such as soybeans, iron ore and soft commodities such as coffee and sugar on the export market.”

Raw sugar dropped to 15.99 cents a pound, the lowest since Oct. 2. Soybeans retreated to $9.795 a bushel. Soybeans slumped 24 percent this year on a record harvest in the U.S.

The focus for soybeans is switching from the record U.S. crop to prospects for demand and production in South America, Hansen said. “Those stories could create some support in the market,” he said.

West Texas Intermediate crude fell 1.9 percent to $79.44 a barrel, the lowest since June 2012, after Goldman Sachs Group Inc. joined other banks in lowering price forecasts amid concern supplies are outpacing demand. Brent slid 1.8 percent to $84.57 a barrel.

U.S. gasoline declined 2.2 percent to $2.1334 a gallon.

Copper climbed 0.5 percent to $6,722.75 a metric ton. A union gave notice to Freeport-McMoRan Inc. that it plans to strike at the Grasberg copper mine in Indonesia, Juli Parorrongan said by phone today.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE