Sugar Futures Drop On Expected Export Increases In India

(Nasdaq) – Sugar futures ended lower for a second session Wednesday as bullish investors took profits on news that India would provide subsidies to encourage sugar exports.

Raw sugar for March delivery fell 2.1% to end at 14.47 cents a pound on the ICE Futures U.S. exchange.

After Wednesday’s close, India, the world’s second largest sugar producer, approved a plan to offer incentives to sugar cane farmers to reduce the financial burden of millers and encourage exports. Mills would be provided with subsidies to pay cane farmers if they agree to export 80% of cane. However, export subsidies for millers that expired at the end of September have not been approved.

“At this moment in time, everything looks better for exports. They will be more competitive than Brazil and Thailand,” said Claudiu Covrig, senior agriculture analyst at Platts’ Kingsman.

Mr. Covrig said millers in India, which have a sugarcane crushing season that extends into April, have several months to decide how much sugar will be exported. Increased domestic demand or lower prices on the world market could still change those decisions, he said, but he’s anticipating that the news out of India will erase a global trade deficit in the year that began Oct. 1.

Traders are betting that after five years in which supply has outweighed demand, the world will get its first chance to unwind from global stock piles. Two weeks ago, hedge funds and other money managers betting on higher prices outweighed the bears by their largest margin since July 1, 2014, according to data from the U.S. Commodity Futures Trading Commission.

Mr. Covrig said he had also been anticipating a trade deficit based on the fact that much of the sugar that’s been stored up isn’t available to the world market.

Agrilion Commodity Advisers said the initial catalyst for the recent fall may have been the opening session of the International Sugar Seminar where Datagro forecasted that the current sugar harvest in Brazil, the world’s largest growing region, would continue until after Christmas, raising its sugar production forecasts above analyst expectations.

In other markets, coffee for March dropped 2.1% to close at $1.1575 a pound, March cocoa lost 0.9% to end at $3,341 a ton, cotton for March delivery rose 0.4% to close at 62.94 cents a pound and frozen concentrated orange juice futures ended up 3.4% at $1.5185 a pound.