Sugar futures fall back below 14 cents, as Brazil's output revives

27.09.2017

Raw sugar futures for March dropped below 14 cents a pound for the first time in more than a month after output in Brazil's key Centre South region was shown to have rebounded faster than investors had expected.

Raw sugar for March, the best-traded contract, tumbled 3.5% in late deals in New York to 13.85 cents a pound, the lot's weakest level in five weeks.

The decline followed the release by cane industry group Unica of data showing that mills in the Centre South, responsible for more than 90% of Brazilian sugar output, produced 3.13m tonnes of sugar in the first half of this month.

That was 50,000 tonnes above the volume that investors had expected, according to a poll by S&P Global Platts, returning the pace of output close to an early-August high.

Higher quality

In fact, the Brazilian cane crush for the first half of this month did not recover as far as the 46.0m tonnes that investors had thought from the rain-hampered levels of late August, reaching only 45.44m tonnes.

However, the crop was of higher quality than expected, possessing a sugar concentration of 150.5 kilogrammes per tonne of cane, some 1.7 kilogrammes above the market forecast.

And the proportion of cane turned into sugar, rather than ethanol. At 48.0% exceeding the market forecast by 0.7 points.

'Not fallen far enough for long enough'

Unica said that the extent of sugar's showing in the processing mix reflected in part a relatively weak showing by ethanol-only mills, which can only produce biofuel from cane.

However, the extent of sugar output spurred too ideas that prices have not exerted sufficient pressure on mills to encourage more of a switch to making ethanol.

"It looks like sugar prices have not fallen far enough for long enough," a European-based soft commodities trader told Agrimoney.com.

"It looks like markets need to send out more of a signal to turn the throttle down on sugar production."

Earlier on Tuesday, Tobin Gorey at Commonwealth Bank of Australia flagged that "Brazilian physical sugar prices have developed small discounts to New York October over the past week.

"The building surplus is a remorseless grind that is wearing away at the market."


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