Sugar Soars Amid Scarce Production
January 03 2017 - 12:13PM
Dow Jones News
By Julie Wernau
Sugar futures rose sharply higher Tuesday as funds added to long
positions in the market during a gap in the sugar season when
production is scarce.
Raw sugar for March delivery jumped 4% to 20.29 cents a pound on
the ICE Futures U.S. exchange, on track for its largest percentage
gain since Sept. 19 and its fifth straight rise.
The sugar market has been on a tear since last week when Unica,
the industry group for the sugar industry in Brazil, the world's
largest growing region, released data indicating that mills there
have largely stopped for the crushing season. In the previous year,
some mills continued to crush cane into March.
"Going into an intercrop season, stocks are coming down all over
the world, especially in Brazil," said Claudiu Covrig, senior
agriculture analyst at Kingsman, a unit of S&P Global Platts.
"Against March, you have every reason to be bullish."
Also in Brazil, a boost to oil prices and a recent drop in sugar
prices has lowered the arbitrage between sugar and ethanol prices,
which could lower the amount of cane mills decide to convert to
sugar over ethanol, traders said.
Traders are also looking to India, the world's second largest
producer of sweetener, with a disappointing sugar crop there
leading some traders to speculate that the country could remove or
lower its import duties for sugar to help supply the domestic
market.
Sucden Financial Research said in a note that sugar production
in India could drop to below 20 million tons from earlier estimates
of 23 million tons and that dry weather in the main cane area of
Maharashtra is causing many mills to close operations early.
"Should the pace of production decline further, it may put
further pressure on the Indian government to reduce the 40% import
duty," the firm said.
In other markets, cocoa for March was up 1.6% at $2,159 a ton,
arabica coffee for March lost 0.6% to $1.362 a pound, frozen
concentrated orange juice for March was up 0.3% at $1.9435 a pound
and March cotton rose 1.6% to 71.78 cents a pound.
Write to Julie Wernau at julie.wernau@wsj.com
(END) Dow Jones Newswires
January 03, 2017 11:58 ET (16:58 GMT)
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