Sugar prices seen recovering during Q3

Published: 06/14/2017, 4:18:57 PM

Market commentators are upbeat on prospects for a recovery in New York raw sugar futures- with the consensus price forecast, while down 0.6 cents a pound to 17.4 cents a pound for the last three months of this year, still well above the 13.79 cents a pound at which October futures are valued at, according to Agrimoney.

"Sugar prices have taken a pummelling over the last month, largely due to Brazil's decision to cut the price of gasoline, which could encourage producers to divert more cane to sugar production rather than to ethanol," FocusEconomics said.

Indeed, data on Tuesday on sugar output in Brazil's key Centre South region extended a run of statistics showing greater-than-expected sugar production.

However, there are also ideas among investors that values could see upward pressure, as a long spell of selling by hedge funds, which has driven them to an unusual net short in sugar futures and options, potentially goes into reverse.

One broker commented this week that "the consumers of sugar almost never buy forward, while the producers always sell forward, so it is logical that in normal circumstances, the funds should always be net long, as counterpart to the producers.

"Therefore their current net short is abnormal," as borne out by historical trends.