Sugar Prices Fall to One-Year Lows After Cut in Gasoline Prices
May 26 2017 - 12:15PM
Dow Jones News
By Carolyn Cui
Sugar prices fell to one-year lows Friday, as traders were
spooked by a surprise gasoline price cut by Petrobras and Brazil's
larger-than-expected cane crush.
Raw sugar for July lost 3.1% to 15.18 cents a pound on the ICE
Futures U.S. exchange, the lowest price since April 2016.
Brazilian state-run oil company Petroleo Brasileiro SA, known as
Petrobras, said Thursday night that it decided to reduce the
average price of gasoline at its refineries by 5.4%, a move to win
back its shrinking market share in the country's internal gasoline
sales.
For the sugar community, this came as a surprise. Lower gasoline
prices would further discourage sugar mills from producing ethanol,
therefore adding to the woes of an already-oversupplied sugar
market.
"Given the gasoline arbitrage was -12% according to DATAGRO,
they should have RAISED prices by that amount," according to
Michael McDougall, director of commodities at Societe Generale
SA.
On Friday, Brazil's sugar-industry group Unica said farmers in
the country's center-south region would harvest 38.46 million
metric tons of sugar cane during the two-week period ended May
16.
That came in higher than market expectations. Analysts surveyed
by S&P Global Platts estimated that only 36.15 million tons of
cane was crushed, as excessively wet conditions would have slowed
production.
Sugar came under pressure after crude oil prices' 4.8% slump
Thursday, as OPEC members agreed production cuts fell short of what
the market was expecting.
"Unica just added a bit more bearishness to the market," said
Claudiu Covrig, a senior analyst at Kingsman, a unit of S&P
Global Platts. "For sure, traders will try to sell into this
market."
In other markets, cocoa for July was up 1.8% at $1,911 a ton,
July arabica coffee gained 0.8% to $1.3050 a pound, frozen
concentrated orange juice for July added 0.2% to $1.3620 a pound,
and July cotton rose 0.2% to 77.31 cents a pound.
Write to Carolyn Cui at carolyn.cui@wsj.com
(END) Dow Jones Newswires
May 26, 2017 12:00 ET (16:00 GMT)
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