Sugar Rebounds From 16-Month Low
27 June 2017 - 8:27PM
Dow Jones News
By Carolyn Cui
Sugar rebounded Tuesday after hitting its lowest level in 16
months a day earlier, as traders awaited news out of Brazil
regarding the pace of sugar production.
Raw sugar for July added 0.3% to settle at 12.65 cents a pound
on the ICE Futures U.S. exchange. The contract settled at 12.61
cents Monday, the lowest level for the front-month contract since
February 2016.
An S&P Global Platts survey showed that sugar production in
Brazil's key center-south region was expected to more than double
in the first half of June to 2.45 million metric tons, which would
also represent a 40% increase from the second half of May. Only 1.4
days were estimated to have been lost to rain during the period and
current weather is ideal, suggesting that sugar mills would
increase sugar production.
Brazil's Union of Sugar Cane Industry Association is scheduled
to release the results Wednesday, the group said in a notice.
"Sugar production [will] set a new fortnightly record for this
season due to a high sugar mix level and good crushing volumes,"
said Claudiu Covrig, a senior agriculture analyst at Platts
Kingsman, a unit of S&P Platts.
Sugar traders are closely watching Brazil, as it is big enough
to swing the global market. Despite a 30% drop in sugar prices from
a year ago, many Brazilian mills would continue to produce sugar as
they already locked in prices when they were higher.
However, with current prices now below many producers' costs, it
is expected that the amount of cane devoted to ethanol production
will increase, said Nick Penney, senior trader at Sucden Financial
Research, in a note to clients.
Michael McDougall, director of commodities agency at Societe
Generale, noted that there were still more than 80,000 lots
outstanding in the July contract, which is set to expire in four
trading days.
The open interest is 39% above the expiry of the previous May
contract, which ended up in a delivery of 1.5 million tons, second
only to the record 1.9 million ton delivery in May 2015, according
to Mr. McDougall.
"So potentially, we have a large delivery, and that, in theory
should be negative," he said.
In other markets, cocoa for September gained 1% to close at
$1,863 a ton, arabica coffee for July was up 0.6% to settle at
$1.2530 a pound, frozen concentrated orange juice for July added 1%
to $1.4125 a pound, and December cotton rose 0.7% to settle at
67.71 cents a pound.
Write to Carolyn Cui at carolyn.cui@wsj.com
(END) Dow Jones Newswires
June 27, 2017 15:12 ET (19:12 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.