Sugar Prices Shoot Up to 3 1/2-Year Highs
June 29 2016 - 11:20AM
Dow Jones News
By Carolyn Cui
Sugar prices soared to their highest levels in three-and-a-half
years on Wednesday, bolstered by speculation that a trading house
was set to take another big physical delivery off the commodity
exchange.
Raw sugar futures for July delivery rose 4.4% to 20.68 cents a
pound on the ICE Futures U.S. exchange. The commodity was on track
to settle above the closely watched price level of 20 cents, which
would also be the highest price level for the front-month sugar
contract since October 2012.
Wednesday's strong price moves surprised many market
participants. "Everything should actually point to a lower market
than this," said Bruno Conte de Lima, head of sugar and ethanol in
Brazil at INTL FCStone Financial Inc. For example, concerns over
heavy rainfall in Brazilian growing areas were alleviated by
forecasts of dry weather for the next 15 days, helping mills and
producers pick up the crushing operations that were delayed by the
weather.
But traders noted that there were still 32,006 contracts left as
of Tuesday in the July contract, which would expire by the end of
Thursday. This has fueled speculation that some traders were ready
to take delivery--a sign of robust demand in the physical
market.
Over the past year or so, Singapore-based commodity company
Wilmar International Ltd. has bought more than $1 billion worth of
sugar through the exchange.
Analysts at INTL FCStone now expect between 800,000 and one
million tons of sugar would be asked from when the July contract
rolls off the board. The July contract currently trades at a deeper
discount to the October contract than the prices in the physical
market, suggesting that an effort to lift sugar from the exchange
could be justified.
This year, sugar prices have rallied more than 35%, largely
supported by a consensus that after five years of surpluses,
consumption will exceed supply for the next two years. At the same
time, a stronger Brazilian real has also increased the
profitability of Brazilian producers' export sales. The market has
since attracted many financial players to make bets.
The concern now is how much higher sugar prices could go without
any fundamental support, Mr. Lima said.
In other markets, cocoa for September added 0.8% to $3,029 a
ton, arabica coffee for September rose 2.3% to $1.4395 a pound,
frozen concentrated orange juice futures for July gained 1.5% to
$1.7260 a pound, and December cotton added 0.3% to 66.03 cents a
pound.
Write to Carolyn Cui at carolyn.cui@wsj.com
(END) Dow Jones Newswires
June 29, 2016 12:05 ET (16:05 GMT)
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