Sugar sinks to year’s low
Demand from top consumer India likely to be low
LONDON: Raw sugar slid to its lowest level this year on speculation India, the top consumer, won’t need to import as much as previously thought.
While the Indian Sugar Mills Association cut estimates for sugar output this season, it said there’s no need to replace local supply with imports. Stockpiles will be sufficient to meet demand until new sugar arrives on the market in October, it said.
Funds have been reducing bullish bets following a 28% jump in prices in 2016, the most in seven years, led by expectations that a drought would boost Indian imports.
“The market chat concerning India seems to be slipping away from the sugar bulls on a daily basis,” Tom Kujawa, co-head of the softs department at Sucden Financial Ltd, said in an emailed report.
Raw sugar futures for May delivery fell as much as 2.3% to 18.72 US cents a pound on ICE Futures in New York, the lowest level since Dec 28. The white-sugar contract for May delivery dropped 1.5% to US$526 a tonne in London. The premium for white sugar over raw prices rose for a 10th day, the longest streak in two years.
Money managers cut their net-bullish wagers on raw-sugar futures and options by 14% in the week ended Feb 28, the most since November, the Commodity Futures Trading Commission data showed. They also cut their net-long wagers on London white sugar. “Prices remain weak and further declines look likely especially if some more aggressive fund long-liquidation emerges later today,” ADM Investor Services said in an emailed report.
Indian output in the year that began Oct 1 may total 20.3 million tonnes, ISMA said, compared with a January estimate of 21.3 million tonnes, as drought hit the states of Maharashtra, Karnataka, Andhra Pradesh and Telangana. Domestic sugar consumption may total 23.8 million to 24 million tonnes, down from 24.8 million tonnes a year ago, it said.
Demand is set to fall after Prime Minister Narendra Modi cancelled high-value currency notes in an effort to tackle corruption and tax evasion, curbing purchasing power. Consumption was lower in the fourth quarter, probably due to the demonetisation policy, Karim Salamon, head of analysis at Wilmar International Ltd, said in an interview in Marrakesh last month.
Meanwhile, Arabica coffee for May fell 0.6% to US$1.4055 a pound in New York as Robusta beans dropped 0.5% to US$2,165 a tonne in London. Cocoa futures for the same month retreated by 0.6% to US$1,923 a tonne in New York as the London contract was down 0.3% to £1,583 (US$1,930) a tonne.