Raw-Sugar Futures Slide to 3 1/2-Year Low

January 24th, 2014


Category: Sugar

(Wall Street Journal) – Raw-sugar prices fell to the lowest level in 3½ years Wednesday as new estimates added to concerns about a global glut of the sweetener.

Raw sugar for delivery in March on ICE Futures U.S. ended at 15.03 cents a pound, the lowest settlement for the most actively traded contract since June 8, 2010.

Earlier in the day, consulting firm Safras & Mercado said it expects top sugar producer Brazil to grow 2.3% more cane in the year starting in April than it did in the current year. Farmers in Brazil’s main cane-growing region reaped a record crop in the current year, and Safras’s estimates suggested the country would be able to produce even more sugar in the year ahead.

Also Wednesday, Macquarie Group raised its forecast for global sugar supplies to outpace demand in the year ending Sept. 30. The Australian bank said supplies would likely exceed demand by 4.5 million tons, up from its previous estimate of 3.2 million tons.

Global supplies have grown as farmers have planted more sugar cane and beets, the result of high sugar prices a few years ago. But demand has grown at a slower pace, and sugar is piling up around the world, weighing on prices. Raw-sugar futures are down 8.4% this year.

“We’re still dealing with the tail-end of the Brazil harvest coming out and we’re looking at a lot of potential selling out of Thailand and India,” said Jack Scoville, a vice president at brokerage Price Futures Group in Chicago. “There doesn’t seem to be any shortage coming any time soon, so we keep pressing the market lower until we start seeing signs that producers will produce some other commodity.”

Macquarie said in its report that raw-sugar prices may fall to as low as 14 cents a pound in the first half of the year.

“The ‘bargain hunting’ and ‘reserve replenishing’ type demand has already been met in the last two quarters—meaning additional demand will be gained only if prices become that much more attractive,” Macquarie said.

Arabica-coffee futures also fell as rains in top grower Brazil calmed some concerns about dry weather hurting output in the coming harvest.

Coffee for delivery in March ended 1.2% lower at $1.1485 a pound, a day short of a three-week low.

Frozen orange-juice concentrate futures ended slightly higher as cold weather was expected to hit Florida, the top U.S. citrus grower. March-delivery juice gained 0.6% at $1.4420 a pound.

Cocoa for March ended 0.7% higher at $2,697 a ton, while March-delivery cotton futures settled 0.3% lower at 87.84 cents a pound.

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