Sugar Falls to 16-month Low After Brazil Production Report
June 28 2017 - 4:35PM
Dow Jones News
By Carolyn Cui
Sugar fell Wednesday, hitting its lowest level in 16 months,
after a Brazil industry group reported that sugar production in the
country's key growing region in the first half of June nearly
doubled from a year earlier.
Raw sugar for July declined 0.8% to settle at 12.55 cents a
pound on the ICE Futures U.S. exchange.
Industry group Unica said that center-south mills produced 2.4
million tons of sugar, up 97.8%, and made 1.5 billion liters of
ethanol, an increase of 39.7%. The results were slightly lower than
an S&P Global Platts survey which indicated an output of 2.45
million metric tons.
Unica also said that the production mix for the first half of
this month was 49.3% sugar to 50.7% ethanol, while Platts estimated
the sugar mix to be 48.7%.
The reaction in the sugar market showed that traders were still
concerned about the record production this year from Brazil, which
could leave the world with a surplus.
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, some traders said.
Michael McDougall, director of commodities agency at Societe
Generale, noted that there were still 64,526 lots outstanding in
the July contract, which is set to expire in three trading
days.
The open interest is 33% above 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 1.1% to close at
$1,884 a ton, arabica coffee for September was down 0.7% to settle
at $1.2440 a pound, frozen concentrated orange juice for September
fell 2% to $1.3840 a pound, and December cotton lost 0.1% to settle
at 67.65 cents a pound.
Write to Carolyn Cui at carolyn.cui@wsj.com
(END) Dow Jones Newswires
June 28, 2017 16:20 ET (20:20 GMT)
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