Sugar Prices Record Largest Weekly Gain Since 2008
Category: Sugar
(Wall Street Journal) – Sugar prices posted their largest weekly gain in more than six years, as investors focused on a slowdown in production of the sweetener from top grower Brazil.
The October raw-sugar contract on the ICE Futures U.S. exchange jumped 4.8% on Friday to 15.41 cents a pound, bringing the week’s percentage gain to 14%, the largest June 2008 on a continuous front-month basis. The more actively traded March contract rose 3% to 16.56 cents a pound.
The market on Friday capped off five consecutive days of gains, the longest since March.
Prices started the week higher as investors closed out bets that futures would continue to fall after the October contract settled at a five-year low on Sept. 19. The gains accelerated Wednesday, after the Brazilian Sugarcane Industry Association, or Unica, said the sugar production was falling.
Brazil is the source of one-fifth of the world’s sugar, and the country’s worst drought in decades has clipped the availability of cane. In addition, a slump in prices in recent months has encouraged producers to dedicate more of their cane to the production of ethanol instead of the sweetener.
Mills in the center-south region, which produces about 90% of Brazil’s sugar cane, crushed 39.89 million metric tons of cane in the first two weeks of this month, down 7.4% from a year ago, Unica said. From the cane, the mills produced 2.5 million tons of sugar, a 16% drop from the year-earlier period, and 1.96 billion liters of ethanol, 4.4% more than last year, Unica said.
Sugar production for the first six months of this harvest is 1.7% higher than last year, but the drought could sharply reduce Brazil’s output in the coming weeks, Unica said. Traders are betting that the harvest ends earlier than usual and that Brazil’s production will suffer.
“You’re beginning to turn the corner,” said Michael McDougall, head of the Brazil desk at brokerage Newedge, referring to sugar prices.
Arabica coffee for December ended 2.1% higher at $1.8605 a pound, buoyed by concerns over how the Brazilian drought will affect production this year and the next.
Orange-juice concentrate for November gained 2.4% to end at $1.4365 a pound, while cocoa for December slipped 0.7% to end at $3,311 a ton. Cotton for December rose 0.8% to 61.89 cents a pound.
