Raw Sugar Slips Again as Glut Weighs on Market

August 25th, 2014

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Category: Sugar

(Wall Street Journal) – Sugar prices posted their biggest one-day loss in nearly two months on Friday, as the market resumed its recent decline amid a global glut of the sweetener.

Since the Brazilian sugar-harvesting season began in April, output from the world’s largest producer and exporter has increased from a year ago amid weak demand. The International Sugar Organization projects global sugar production in the year ending Sept. 30 will outstrip demand for a fourth consecutive year, after a series of bumper crops out of Brazil and other major producers flooded the global market. Analysts attribute much of the rise in supplies to investments made by producers when prices were much higher.

It was a rocky week for sugar futures. Raw sugar for October delivery fell to the lowest level since Feb. 11 on Tuesday, before climbing 3.4% during the next two sessions as investors closed out bets that prices would continue to fall. But the October contract ended at 15.64 cents a pound Friday on the ICE Futures U.S. exchange, down 2.2%. It was the biggest daily percentage loss since June 27. Futures ended down 1.8% for the week.

Some traders and analysts say the market is due for a turnaround. Sugar-cane processing in Brazil slumped last month, fueling worries that the harvest would end earlier than usual. Brazilian mills had been racing to process as much cane as possible after the worst drought in decades earlier this year.

“There are more reports from the interior of São Paulo state regarding the very poor quality of the cane that is to be harvested now in the last quarter of the crushing season,” said Michael McDougall, senior vice president at brokerage Newedge in New York.

The market is looking ahead to a report from Brazilian sugar-cane industry group Unica on the harvest’s progress, due in the coming week. Traders and analysts expect Unica to lower overall sugar-cane and sugar-production forecasts.

In other markets, cocoa for delivery in December fell 0.2% to $3,194 a ton, the lowest close since July 29, when it settled at $3,177 a ton. Orange juice for September delivery fell 0.2% to $1.4580 a pound, and December-delivery arabica coffee shed 1.2% to settle at $1.8735 a pound. Cotton was the only gainer among the soft commodities, with the December-delivery contract rising 0.4% to 66.18 cents a pound, the highest close since July 23.

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