Commodity Blog

Commodity Prices – Sugar

Crude oil fell on the speculation the spreading Europe’s crisis will slash demand. Germany auctioned its debt yesterday and it was considered a disaster as there was a significant lack of demand for the government bonds, reinforcing concerns about Europe’s economy. The US economy also showed sings of slowdown. January futures for crude oil dropped $2.25 to $95.76 per barrel before trading at $96.45 on NYMEX.

Sugar prices declined on the outlook for higher supply from Brazil. Luis Pogetti, chairman of the Copersucar SA, predicted that production will go up to 34 million metric tons in Brazil’s Center South next year. India is also expected to add to the global supply. March contract for delivery of raw sugar fell 1 percent to $0.2321 per pound on ICE after reaching $0.2316 — the lowest level since June 2.

Sugar declined on forecasts of good harvest. At the same time, expectations for soybean yield more pessimistic, causing the crop to gain.

Sugar was down on the signs of advancing output from Ukraine. Ukraine’s harvest of sugar beet was almost 29 percent larger than in the previous year as of November 1, according to the government report. The US Department of Agriculture estimated that Ukraine’s sugar exports will double in the 2011–12 season.

The USDA projections for soybeans, on the other hand, were more pessimistic. The USDA predicted that production in the USA will decline 8.5 percent to 82.9 million metric tons this year. The reason for the declining output is dry weather in parts of the United States.

March futures for delivery of raw sugar declined 1.6 percent to $0.2499 per pound by 8:21 on ICE. The weekly decline was 2.3 percent, while prices were down 22 percent over this year. Futures for delivery of soybeans in January advanced 0.7 percent to $11.755 per bushel as of 13:15 on CBoT.

US sugar stockpiles shrank to the lowest level in 37 years, making prices surge and forcing the government to increase import quotas.

The US Department of Agriculture estimated yield in Minnesota, the biggest beet growing state of America, will be 19 percent down from the previous year. Four more of the 10 biggest producing states may also have reduced output. The USDA forecast the US inventories of sugar will shrink more than 35 percent in the year through August 2012.

Retail prices for the sweetener have risen 9 percent since the beginning of this year. The rising prices caused the government to increase import quotas by 45 percent in 2011.

Spot price for sugar rose from 24.75 to 25.25 today as of 18:56 on ICE. Earlier settlement reached the daily maximum of 25.69.

The sugar futures managed to pare their recent losses and reach the highest level in more than a week today amid the positive market sentiment. It’s based on the German approval of the additional powers for the eurozone bail-out fund, better fundamental reports from the United States and the increasing expectations of poor sugar production in Brazil.

Brazil is holding the worlds leadership in sugarcane growing with about 37 percent share of the global industry. News of the decreased sugarcane crops in this country due to the bad weather conditions have inspired the market last Friday. Now the seeds of these speculations have fallen on a fertile soil of the global market optimism.

German Bundestag approved the extra rights for the European Financial Stability Facility — the eurozone bail-out fund. The new functions will include buying bonds on the secondary markets, recapitalization of the banks and issuing the precautionary credits. This will most likely help to contain the European debt crisis, increasing the global demand for commodities.

The US statistics played its role in the rise of sugar prices today — last week’s unemployment claims turned out to be about 7 percent lower than the median forecast of the economic strategists was showing. Additionally, the second quarter of 2011 GDP growth figure was revised positively in the United States. These factors added to the reasons for the bull markets today.

Sugar futures contracts with September 30 delivery rose from $25.62 to $27.08 for 112 pounds or about 5.7 percent as of 17:47 GMT today. The highest intraday level was at $27.64 — commodity’s maximum price since September 21.

US farmers may cut most of their breeding cows to reduce losses because of drought. Texas ranchers may sell or slaughter 500,000 beef cows as the dry weather made them to expensive to feed. The losses of the states’ farm may reach $5.2 billion as the past 11 months were the driest since 1985 in the region. December futures for delivery of cattle advanced 1.1 percent to $1.192 by 13:00 on CME.

India’s production of sugar may reach a highest level in four years. Analysts predict the output may total 25.83 million metric tons in the year starting October 1, compared with 24.2 million tons estimate for this year. The high production may prompt India to lift the limit on exports. The resulting boost of supplies on global markets can drive prices down. Sugar spot price fell 1.1 percent to $0.2760 from $0.2790.

Rice is expected to surge as the smallest increase of inventories in five years may create deficit on markets. Stockpiles increased only 1.1 percent this year, compared to 29 percent in the past four years. The estimates of the US Department of Agriculture predicts signal that supply, being 456.2 million metric tons, still exceeds demand (455.2 million tons). Yet market analysts predict that prices will jump 20 percent by the end of this year. So far, prices for rice advanced 15 percent from May.

Sugar fell today on the speculation that India will increase exports, causing supply to exceed demand. On the other hand, China and Indonesia are going to expand their purchases of the commodity, potentially supporting prices. October contract for delivery of raw sugar slipped $0.0022 (0.8 percent) to $0.2762 per pound as of 12:24 on ICE.

July sugar exports from Brazil (the world’s biggest sugarcane producers) climbed to the maximum in eight previous months, pushing the market prices for this commodity down to 2-week minimum.

From the technical analysis point of view, the decline is finely justified as a correction that followed a sharp rally in July. That rally was induced by the rumors that Brazilian production will decline.

The market analysts point out the fact that the buyers are currently afraid of the tons of supply that may get into the market anytime. If that happens, supply may overwhelm any demand, sending the prices down the hill.

September sugar futures fell from $29.02 to $28.27 per 100 pounds or more than 2.5 percent as of 17:17 GMT on ICE today. It’s the lowest level since July 18.

Soybeans extended the longest rally since August on concerns that adverse weather may hurt crops in the US. The National Weather Service predicted that temperatures will be 12 degrees Fahrenheit above normal for five days starting July 16 in the Midwest. November futures for delivery of soybeans added $0.02 cents (0.1 percent) to $13.8175 per bushel at 10:30 on CBoT.

Gold retreated from the record as Federal Reserve Chairman Ben Bernanke spoke today, indicating that the Fed won’t add more stimulus for the US economy. Earlier the precious metal jumped to a record as Fitch Ratings downgraded Greece’s credit rating. August futures for delivery of gold gained $4.10 (0.3 percent) to $1,589.60 as of 12:46 on COMEX after reaching the all-time high of $1,594.90 per ounce.

Sugar posted a biggest drop in eight weeks today on the forecast that production in Brazil will be bigger than previously estimated. Prices climbed 24 percent in the last month on concerns about output. October futures for delivery of raw sugar slumped as much as 0.0122 (4 percent) to $0.2902 per pound by 14:00 on ICE, posting the biggest drop since May 19. Yesterday, the price reached the highest level in five months of 0.3133 cents.

Corn and wheat fell on the forecast that favorable weather will boost yield. Rainfall in the UK and France should boost crops that were already planted, as well as those that will be planted later. Stronger dollar curbed appeal of US commodities and attracted traders to Europe. December futures for corn delivery slid $0.03 (0.5 percent) to $6.57 per bushel as of 10:35 on CBoT.

Sugar reached the highest level in two months on concerns about disruptions of supplies from Brazil. Shipments of Brazilian sugar are expected to be delayed for another 20 or 30 days. October futures for delivery of raw sugar rose $0.0083 (3.3 percent) to $0.2621 per pound by 14:00 on ICE. The price for thee most-traded contract reached touched $0.2631, the highest level since April 12. Futures advanced 3.4 percent last week.

Gold climbed, while crude oil slid, as the US labor market was in bad condition last month. The US nonfarm payrolls showed the increase by 54,000 in May, compared to the forecast 161,000. The unemployment rate increased to 9.1 percent from 9.0 percent. The US stockpiles of crude increased by 2.9 million last week. August futures for delivery of gold went up $9.70 (0.6 percent) to $1,542.40 per ounce as of 13:38 on COMEX. July contract for crude oil delivery slipped $0.18 t$100.22 per barrel on NYMEX.

Sugar jumped to the highest level in seven weeks on speculation that supply from Brazil may decrease. Unica, Brazil’s sugarcane industry association, said that the production fell 17 percent in the first half of May from a year ago. July delivery for raw sugar gained as much as $0.043 (1.8 percent) to $0.2395 per pound by 14:00 on ICE.