Sugar Prices Manage Gain Amid Brazilian Real’s Rise

(Nasdaq) – Sugar prices managed to eke out a gain Thursday after the currency of Brazil, the world’s largest sugar producer, moved higher against the dollar.

At the same time, the International Sugar Organization in London gave its first supply and demand estimates for the year beginning Oct. 1, saying that consumption is expected to exceed production for the first time in six years.

Raw sugar for October delivery ended up 0.3% at 10.62 cents a pound on the ICE Futures U.S. exchange. The real was up 0.9% against the dollar recently, encouraging producers to hold off sales. Sugar is sold in dollars and a higher real means fewer repatriated profits for producers.

In earlier trading, the contract flirted with seven-year lows, dropping as low as 10.44 cents a pound.

China’s decision to introduce a more market-based exchange rate to its currency, lowering the value of the yuan against the dollar, makes dollar-denominated imports more expensive for China. China is the world’s largest importer of raw sugar, followed by Indonesia, which has seen the rupiah decline 3% against the dollar since Aug. 10.

However, brokers said when it comes to sugar, China is still buying.

“It’s not as simple as the market seems to want to put it,” said Mike McDougall, head of the Brazil desk at Societe Generale in New York.

The International Sugar Organization said Thursday that China is on track to reach record raw-sugar imports for the year ended Sept. 30, with high internal prices for sugar and lower-than-expected production. From October to June, China has imported just under 3.4 million metric tons of raw sugar versus 3.3 million metric tons over the year-earlier period. The ISO is predicting China will import 4.5 million metric tons this year, a record, and that it will break that record again next year, importing 4.6 million tons.

“China is the isolated bullish story in the bigger picture,” said Guilherme Kfouri, senior economist at the ISO. ” India has had a record year of output. We have good production in Thailand. Even Brazil, where we had a drop in production, it isn’t enough. The market is oversupplied. You have more bearish factors than bullish ones.”

In other markets, arabica coffee for December delivery fell 1.7% to end at $1.3245 a pound, cocoa for December rose 0.6% to $3,135 a ton, cotton for December moved higher, up 0.6% to close at 66.93 cents a pound and frozen concentrated orange juice for November fell 1.3% to end at $1.287 a pound.