Raw sugar prices fell to their lowest level in more than six years on Wednesday as traders anticipated more supply entering the global market.
Raw sugar for July delivery dropped 1.7% to 11.87 cents a pound on the ICE Futures U.S. exchange, the most actively traded contract’s lowest close since Jan. 14, 2009.
Brazil, the world’s largest sugar exporter, is approaching the height of its crushing season when sugar cane is processed into sugar and ethanol. Industry group Unica said last week that Brazil’s main sugar-producing region would crush 590 million metric tons of cane in the current season, a 3.3% increase from a year ago. Brokers said investors are anticipating higher yields from the sugar cane because of favorable weather this year.
“The only question going forward now is what are the yields going to be like?” said Phil Pia, desk broker at Société Générale in New York.
The International Sugar Organization said last week that production of the sweetener would outstrip demand for the fifth year in a row this year but fall short in the year beginning Oct. 1. However, global stockpiles are likely to continue to weigh on prices in the coming year even as production dwindles.
Recent weakness in the Brazilian real and a boost in the dollar haven’t helped prices, according to Agrilion Commodity Advisers. When the dollar is strong and the real is weak, producers are encouraged to sell their dollar-denominated sugar to reap higher profits from the favorable exchange rate. The Wall Street Dollar index, which tracks the dollar against 16 currencies, was up 0.2% recently.
“Unless there is a major change within Brazil, or the U.S. dollar reverses its recent recovery, it looks as if the real will help keep some pressure on the sugar market,” Agrilion said in a note.
In other markets, frozen concentrated orange-juice futures continued to fall on weak retail demand, with the July contract ending down 1.4% at $1.1295 a pound. The contact has slid 4.7% since the Florida Department of Citrus reported Tuesday that U.S. consumers are buying less orange juice.
Arabica coffee for July ended a five-session losing streak, rising 0.4% to $1.245 a pound. Cocoa for July delivery fell 0.5% to end at $3,134 a ton, and July cotton lost 0.4% to finish at 63.05 cents a pound, its lowest close since April 22.