Sugar Drops as Supply Expectations Increase
Category: Sugar
(Nasdaq) – Sugar prices slumped Monday after a Brazilian consulting firm said it expects higher sugar production this year, in part, because of a recent spike in prices.
Raw sugar for March delivery fell 3.3% to close at 13.99 cents a pound, its lowest close since Oct. 13.
The Brazilian firm Agroconsult released one of the first estimates for the Brazilian sugar-cane crop for the marketing year that began Oct. 1, saying crop volume will grow 5% to as high as 630 million tons because of a boost in rainfall.
The sugar harvest in Brazil, the world’s largest sugar producer, isn’t set to begin until April for this crop year. The firm said that recent price increases, if sustainable, will encourage more sugar production over ethanol. Last week, sugar prices hit their highest level since January. The contract has seen increasing volatility.
Shawn Hackett, president of Hackett Financial Advisors in Boynton Beach, Fla. said rains and high prices couldn’t have been more poorly timed for the bulls as they coincided with farmer and mill decisions about whether or not to continue to invest in cane fields for the coming year.
“You wanted those guys to not plant. Now they’re going to plant,” he said. “That’s going to create incredibly good looking crop possibilities for next year. If you’re a bull, that’s the worst thing that could have happened.”
Still, rains in Brazil have delayed the harvest that is currently underway, which could mean cane left in the field and revenue losses for mills that are already struggling, Michael McDougall, head of the Brazil commodities desk at Societe Generale in New York said in a note.
“How many mills are hanging on despite the low prices and crushing debt is a testament to their persistence, and perhaps of the banks as well,” Mr. McDougall noted.
In other markets, arabica coffee for December ended flat at $1.1775 a pound, cocoa for March fell 0.9% to close at $ 3,216 a ton, cotton for December dropped 0.4% to close at 61.90 cents a pound and frozen concentrated orange juice for January rose 1.5% to end at $1.394 a pound.
