Sugar Falls Slightly as Traders Await New Data
February 22 2017 - 12:29PM
Dow Jones News
By Carolyn Cui
Sugar futures edged lower Wednesday, as traders were sitting on
their hands waiting for new information to shake the lackluster
market.
Raw sugar for March delivery fell 0.5%, to 20.69 cents a pound
on the ICE Futures U.S. exchange.
Sugar prices have been moving in a narrow range between 20 cents
and 21.5 cents so far this year as market participants have been
torn between opposing bullish and bearish forces. While the
industry largely expects the global sugar market to return to a
modest surplus in 2017/2018, many traders are betting on rising
demand for imports from India and China.
During the same period over the past two years, sugar prices
moved 1.75 cents in 2015 and 2.45 cents in 2016, while this year
the range was 1.15 cents, noted Rafael B. M. Crestana, a consultant
with INTL FCStone Financial Inc.
"The next sessions will be crucial to make a difference in this
fragile price balance and finally break the stability," he said in
a note to clients. "The crucial point is that the relative
'stillness' in the market is not normal and most likely represents
the 'calm before the storm.'"
The sugar market is facing a number of uncertainties. Chief
among them is whether India would lower its import duty to allow
more imports of the commodity. China is also seen to be taking in
more white sugar through Myanmar, the gateway for sugar smuggling
into China. On the production side, farmers in Brazil, the world's
largest sugar exporter, will soon start to plant the next crop.
Traders are also closely watching the March contract, which is
set to expire at the end of the month. Based on the current market
structure where the March contract trades at a slight premium over
the May contract. "The delivery looks unlikely to be a large one,"
wrote Nick Penney, senior trader at Sucden Financial Research.
On Tuesday, the International Sugar Organization slightly
reduced its forecast of the global sugar deficit for the 2016/2017
crop season to 5.87 million tons from 6.19 million tons, but the
industry group also warned of "a critically low level" of sugar
stocks that could underpin the market in the coming year.
"A statistical deficit of the projected magnitude will reduce
the stocks-to-consumption ratio in 2016/2017 by a significant 4.22
percentage points, to only 43.78%. This is the lowest level since
2010/2011," said the ISO, adding "any easing of world prices... may
be muted due to a critically low level of stocks" forecast by the
beginning of the next cycle.
In other markets, cocoa for May unchanged at $1,996 a ton;
arabica coffee for May fell 0.4%, to $1.5120 a pound; frozen
concentrated orange juice for March lost 0.7%, to $1.7420 a pound;
and May cotton rose 0.2%, to 75.83 cents a pound.
Write to Carolyn Cui at carolyn.cui@wsj.com
(END) Dow Jones Newswires
February 22, 2017 12:14 ET (17:14 GMT)
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