(Wall Street Journal) – Sugar prices staged their biggest one-day drop in 2 ½ years on Friday, tumbling nearly 5% as investors took profits from a rise to near two-month highs earlier this week.
Raw sugar for delivery in March on ICE Futures U.S. fell 4.7% to 15.17 cents a pound, the lowest level since Jan. 14. It was the biggest one-day loss since June 22, 2012.
Despite Friday’s tumble, raw sugar has gained 4.5% this month, getting a boost earlier this week from top producer Brazil, which said it would increase fuel taxes. That could increase demand for ethanol and prompt Brazilian mills to produce more of the biofuel than sugar.
But Petroleo Brasileiro SA, or Petrobras, may counter the effect on mills if it lowers gasoline prices, Rabobank said in a research note. The taxes alone “would be expected to support a cane mix in favor of ethanol production during the 2015/16 harvest despite a weak real,” the bank said. But a Petrobras gasoline-price cut “would offset the impact of the…tax and therefore limit the extent to which ethanol prices would rise.”
Friday’s retreat in raw-sugar futures was driven in large part by sell-stops, or preplaced orders to sell when prices fall to a certain level, traders and analysts said.
“Going up, there was that slight catalyst of the Brazilian news,” said James Liddiard, senior vice president at Agrilion Commodity Advisers LLC, a consulting firm in New York. But then, “there was no follow-through buying,” he said. “It’s gone further than it should have done, both up and down.”
In other markets, cocoa futures fell to a one-year low after a report showed Asia processed fewer beans than expected during the last three months of 2014, underscoring weak demand world-wide.
The Cocoa Association of Asia said Friday that grindings in the fourth quarter fell 17% from a year earlier to 141,396 metric tons. Grindings data measure the tonnage of cocoa beans factories process and are considered a barometer of cocoa demand.
Europe and North America had already announced larger-than-expected declines in similar data last week.
“Falling cocoa grindings in Europe, North America and Asia suggest that the world has lost some of its sweet tooth,” Capital Economics said in a note. “We expect weaker demand and ample supply to push the price of cocoa lower.”
March-delivery cocoa on ICE ended down 1.6% at $2,755 a ton, the lowest level since Jan. 22, 2014. The market posted its sixth consecutive day of losses.
Cotton for delivery in March settled at 57.30 cents a pound, down 0.8% and the lowest level since June 29, 2009, despite surging U.S. export sales of the fiber.
The U.S. sold a net 470,300 bales of upland cotton during the week ended Jan. 15, the biggest weekly total since the season began Aug. 1, the U.S. Department of Agriculture said Friday. The sales were up 89% from the prior four-week average. Upland cotton is the most commonly grown variety in the U.S.
Arabica coffee for March delivery snapped a five-session losing streak to end up 1.6% at $1.6245 a pound. Orange juice for delivery in March settled 0.2% higher at $1.4725 a pound.
