Sugar Futures Plunge on Fears of Larger-Than-Expected Surplus
July 25 2017 - 12:24PM
Dow Jones News
By Carolyn Cui
Sugar futures plunged Tuesday, as Brazilian sugar mills
continued to direct more of the cane toward sugar production,
fueling fears over a larger-than-expected surplus.
Center-south mills in Brazil produced 3.1 million metric tons of
sugar in the first half of July, up 9.1% year-on-year, while
ethanol output fell 1.9% to 1.89 billion liters, industry group
Unica said Tuesday.
Raw sugar for October delivery fell 2.8% to 14.00 cents a pound,
on the ICE Futures U.S. exchange.
During the two-week period, mills still heavily favored sugar
over ethanol by directing 50.4% of the cane to sugar production, up
from 47.7% a year earlier, according to Unica. This was running
much higher than what the market had expected. For instance,
analysts at INTL FCStone estimated that 47% of the cane would be
used for sugar crushing.
Even though the cumulative cane crush was down on the year,
cumulative sugar production was 2% higher than same period last
year.
"That is a result of a higher proportion of the cane crushed
directed to sugar production this season," said analysts at Platts
Kingsman, a unit of S&P Global Platts.
Recently, several research firms have revised their estimates
for next year's sugar market surplus, thanks to a larger crop in
Brazil.
Analysts are closely watching Brazil, as a new tax policy might
change the sugar industry's dynamic.
Last week, the Brazilian government announced plans to raise
taxes on gasoline and diesel fuel, in an effort to patch a budget
shortfall in the country. The move was interpreted as positive for
raw sugar prices, as it would drive up demand for ethanol, analysts
said. Higher ethanol consumption will also lift the Brazilian
sugar-ethanol parity floor, which may help support sugar prices,
they said.
In other markets, cocoa for September was down 1.8%, to $1,933 a
ton; arabica coffee for September fell 2.2%, to $1.2955 a pound;
frozen concentrated orange juice for September was up 0.3%, to
$1.3490 a pound; and December cotton added 0.5%, to 68.60 cents a
pound.
Write to Carolyn Cui at carolyn.cui@wsj.com
(END) Dow Jones Newswires
July 25, 2017 12:09 ET (16:09 GMT)
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