(Wall Street Journal) – Sugar prices jumped to their highest levels in more than a year Thursday amid growing concerns over supplies in the world’s top producers.
Raw-sugar futures contracts for May delivery rose 3.4% to 15.99 cents at the ICE Futures U.S. exchange, the highest price for the benchmark contract since Nov. 25, 2014.
“Globally, supply side factors remain supportive via increased crop risk, and broader macroeconomic fundamentals will help this market continue to strengthen, we feel, through the end of 2016,” wrote Michael Ferrari, vice president of commodities & risk analytics at aWhere, an agricultural intelligence company.
Mr. Ferrari noted in the report published on Thursday that Brazil, India and Thailand—three of the world’s top producers—are showing ongoing signs of production risk. In Brazil, while the El Niño continues to slowly fade, “we have not seen the widespread return of a wet pattern hit Centre-South, as would be expected during a ‘typical’ fading El Niño transition,” he wrote. As a result, numbers for sugar-cane estimates may start to decrease, further widening the global deficit.
In Asia, the insufficient moisture is hurting the Thai crop, and the slow fading of the El Niño pattern is also expected to affect crop potential in India and other Asian countries.
Green Pool Commodities, an Australia-based sugar analysis group, made a downward revision to its forecast for this year’s Chinese sugar harvest to 9.2 million metric tons, from 9.5 million metric tons previously.
A rebound in the Brazilian real against the dollar also helped prices on notions that producers would hold back on sales to take advantage of more favorable exchange rates. The Brazilian currency rose 2.5% against the dollar in recent trade to 3.6504 per dollar.
Elsewhere, arabica coffee prices are hitting a new five-month high on the back of a stronger Brazilian real and other technical factors, according to a coffee trader in New York.
“The whole thing is just a function of the weaker dollar,” following dovish statements by the Fed on Wednesday, according to the trader. The WSJ dollar index is down 0.95% on Thursday. Meanwhile, arabica coffee has also passed a key technical level, fueling short covering, the trader said. The coffee price is up 2.7% at $1.3255 per pound, on the verge of hitting a seven-month high.
In other markets, cocoa for May added 2.5% to close at $3,116 a ton; frozen concentrated orange-juice futures for May edged down 0.2% to close at $1.2755 a pound; and May cotton edged up 0.1% to settle at 58.36 cents a pound.
