Commodity Blog

Commodity Prices – Sugar

Raw-sugar futures gained today on concerns that drought may threaten harvest in Brazil, the largest producer. Harvest of sugar-cane in Brazil’s Center South, the biggest growing region in the world, may be lower than estimated 570 million metric tons if dry weather persists. October delivery for raw sugar rose $0.0063 (3.2 percent) to $0.2038 per pound as of 10:48 on ICE.

While in some countries wheat harvest is also threatened by drought, in Europe wheat faces other danger: excessive rains. Wheat prices jumped on speculation that Germany and some other countries of the Western European Union would have too much rain and also after Egypt bought 225,000 metric tons of wheat from the US. December futures for wheat delivery gained $0.23 (3.4 percent) to $7.0875 per bushel by 13:15 on CBoT.

Crude oil prices jumped today after manufacturing in the US and China expanded in August faster than expected. ISM PMI in the US rose from 55.5 to 56.3 in August. October settlement for crude oil (Brent) went up $1.71 (2.3 percent) to $76.35 per barrel on ICE.

Soybeans gained today on speculation that US inventories will decline with increasing China’s imports. China bought 284,000 metric tons of US soybeans for delivery after September 1st, while Chinese processors may have purchased more than 1.2 million tons of soybeans from the US in the previous week. November futures for soybean delivery went up $0.0525 (0.5 percent) to $10.39 per bushel as of 10:12 on CBoT.

Cocoa slipped to the lowest level in three months in London on outlook for better harvest in Ivory Coast, the biggest grower in the world. The harvest starting next month may rise 11 percent to 1 million metric tons from 900,000 tons in the previous year. December delivery for cocoa gained $4 (0.1 percent) to $3,039 per ton by 12:03 on ICE.

Raw-sugar futures erased gains, sliding to the two-week low, on speculation that growing supplies from Brazil will curb the global deficit. Production in Brazil’s Center South, the largest producing region in the world, advanced 26 percent in the first half of July. October delivery for raw sugar fell 0.5 cent (2.7 percent) to $0.1774 per pound as of 13:10 on ICE.

Hogs futures slipped today on forecast that high US pork prices may diminish retail demand. Meatpackers shipped 9.215 million pounds of pork last week, the worst week since late June. October futures for hog settlement slid $0.003 (0.4 percent) to $0.793 per pound at 9:42 on CME.

Raw sugar experienced a strongest decrease in almost two moths on speculation that supplies from Brazil and India, the world’s largest producers, would increase, erasing the global deficit. Production in Brazil’s Center South increased by 26 percent in the first half of July, while cane planting in India was boosted by rains, which were 2.5 percent above the 50-year average in July. October delivery for raw sugar slumped $0.0079 (4.1 percent) to $0.1861 per pound by 9:45 on ICE.

Coffee futures dropped the most in two weeks on speculation that the commodity rallied too much, considering the anticipated high supplies from Brazil, the biggest producer. Global coffee production may grow 12 percent to 135 million bags in the year starting October 1st. September delivery for Arabica coffee slid $0.0475 (2.8 percent) to $1.6775 per pound as of 10:04 on ICE.

Sugar prices tend to be unpredictable, as they demonstrated at the first half of this year, slumping dramatically instead of rising, as traders expected. Recently the prices showed signs of some recovery, though. So, where do we stand now, what can we expect? In fact, sugar prices again show unpredictability as analysts provide completely different opinions on this matter. Such turn of event isn’t surprising, as the prices very dependent on weather, which itself quite hard to predict.

On the positive side, we had dry weather in June, import levy in India and outlook for stable demand. Drought might damage crops in Thailand, reducing yield by 10–15 percent. Some experts say that adverse weather may harm next-year harvest in Brazil too. Even in case of big harvest, Brazil may experience problems with delivering it to foreign importers, as it’s currently unable to load sugar on all ships waiting in ports. India may impose 40 percent tax on imports, supporting the price. India may actually keep its supplies from global markets to meet the local demand.

On the negative side, outlook for growing supplies makes it unlikely for sugar price to rise significantly. Indian tax, while supportive for the price, unlikely to boost it higher than current level. India expected to produce about 26 million metric tons of the sweetener, from which around 500,000 tons might be exported. Forecast for Brazilian harvest for the most part shifted from promising lower supplies to predicting higher output. Brazil’s output may climb 14 percent to as high as 41 million tons. Economists say that global deficit would shift to surplus of about 5 million tons in the next season.

All in all, there is no reason to expect major upswing of sugar prices. The prices expected to remain for the most part in the $0.15-$0.18 range. Price of $0.13 can be considered a good buying opportunity.

Raw sugar rose today for a third consecutive day on outlook for increasing purchases from Russia next month as the import tax was lowered. Analysts say that sugar prices may go up 30 percent in 2010 on rising demand, low output and transportation delays. October delivery for raw sugar gained $0.0026 (1.6 percent) to $0.1654 per pound on ICE.

Cattle and hogs slid today on concern for economic growth as the U.S. payrolls was lower than expected. Demand for meat also tends to fall in July and August because of hot weather. August delivery for cattle futures slipped $0.002 (0.2 percent) to $0.8975 per pound as of 12:01 p.m. on CME. August settlement for hog futures dropped $0.008 (1 percent) to $0.8105 per pound.

Cocoa dropped today on concern that the U.S. economic recovery would stall, damping demand for commodities. U.S. nonfarm payrolls dropped in June more than expected. Housing market and manufacturing sector also showed signs of weakness. September delivery for cocoa declined $70 (2.3 percent) to $2,971 per metric ton on ICE.

Cotton and soybeans dropped today on signs of increasing output. U.S. farmers planted cotton on the area, 19 percent wider compared to the previous year. The soybeans seeded area will be 1.8 percent wider compared to the last year and will reach the all-time record, while combine output of Brazil and Argentina will grow by 37 percent. December delivery for cotton slid $0.0051 (0.7 percent) to $0.7762 per pound as of 9:50 on ICE. November futures for soybean delivery slipped $00325 (0.4 percent) to $9.0875 per bushel by 11:03 on CBoT.

Raw sugar climbed to the weekly high level on forecast that output in India would be reduced by adverse weather. Production in Thailand may also fall; it expected to decline by 13 percent. October delivery for raw sugar rose $0.0041 (2.7 percent) to $0.1569 per pound as of 11:50 on ICE Futures U.S.

Copper rebounded today as the concern for the global recovery eased after the report about the increased manufacturing in the U.S. Chicago PMI index value of 59.1 in June indicated an increase, as figure above 50 signals about growth. September futures for copper delivery gained $0.0165 (0.6 percent) to $2.947 per pound at 12:20 on COMEX.

Copper dropped today on concerns that economic growth in China may slow. With Europe’s troubles and signs of slowdown of the U.S. economic growth, China remained the main source of optimism on markets. And even it might go away. September futures for copper delivery slid $0.159 (5.1 percent) to $2.9305 per pound on COMEX.

Concern for China’s economic growth also hit sugar futures, which also fell on a notion that the prices rallied too much. The supply picture is mixed, as harvest in India expected to beat estimation, but adverse weather in Thailand can curb output. October delivery for raw sugar dropped $0.0054 (3.4 percent) to $0.1528 per pound on ICE.

Wheat futures slid today as harvest in the U.S. accelerated due to favorable weather. The prices also fell as speculative investors increased their short positions. September futures for wheat delivery went down $0.0625 (1.3 percent) to $4.5875 per bushel by 9:57 on CBoT.

Sugar futures were shifting from losses and gains, after jumping to the highest level in nine weeks in New York on speculation that demand would remain at the present level. Complicated credit situation and high prices depleted sugar inventories last year, prompting consumers to restock their supplies and supporting demand. October delivery for raw sugar slid $0.0001 (0.1 percent) to $0.1618 per pound on ICE Futures U.S. October futures for white-sugar delivery added $10.60 (2.3 percent) to $478.70 per metric ton on the Liffe exchange.

Hog and cattle futures gained on prospect for resuming imports of U.S. chicken to Russia would cause the U.S. meat supplies to dwindle. Russia, previously the biggest consumer of U.S. chicken, has agreed to lift a five-month-old ban on the meat after yesterday’s meeting of U.S. and Russian presidents. August futures for hog settlement advanced $0.00225 (0.3 percent) to $0.83475 per pound by 10:57 on CME. August futures for cattle delivery rose $0.0025 (0.3 percent) to $0.894 per pound.

Cotton prices rose on outlook for increasing demand from mills in the U.S., the biggest exporter of the fiber. U.S. mills used the fiber at an adjusted annual rate of 3.582 million bales in May, compared to the April rate of 3.48 million and up 7.6 percent compared to the previous year. December delivery for cotton gained $0.0028 (0.4 percent) to $0.79 per pound at 10:10 a.m. on ICE.

Sugar prices went up today in New York for the first time in three days on prediction that harvest may be hurt by low precipitation in India, sugar’s biggest consumer. In the week that ended June 23 India’s monsoon, the main source of nation’s irrigation, was 21 percent below average. October delivery for raw sugar rose $0.0038 (2.4 percent) to $0.1619 per pound on ICE.

Wheat futures rose today for the first time in a week also on outlook for adverse weather. As much as 12.5 million acres of grain were prevented from being planted in Canada because of rainfall. The output from the U.S. and Russia may also be lower because of adverse weather. September futures for wheat delivery gained $0.0175 (0.4 percent) to $4.775 per bushel on CBoT.

Copper prices gained today as government reports signaled that demand may be higher then economic indicators previously suggested. Cores durable goods orders rose by 0.9 percent in May and unemployment claims dropped from 476,000 to 457,000 last week, suggesting that the U.S. economic recovery strengthens. On the negative side we have unexpected plunge of new home sales from 446,000 to 300,000, which may curb gains of the metal prices. September futures for copper delivery added $0.0695 (2.4 percent) to $3.024 per pound on COMEX.

Wheat gained today on outlook that production in the U.S., Canada and Russia would decline because of adverse weather. U.S. output may decline 6.7 percent in the year started June 1st; Canadian farmers sowed 7.1 percent less acres than in the previous year; Russia expected to harvest 55.9 million metric tons of wheat, 9.5 percent fewer than previously predicted. September futures for wheat delivery gained $0.0475 (1 percent) to $4.805 per bushel as of 10:24 a.m. on CBoT.

Corn and soybeans fell today on forecast that warm weather would boost harvest. Another reasons for drop of the commodities were the stronger dollar and the outlook for lower demand from China. December futures for corn delivery slid $0.0375 (1 percent) to $3.6825 per bushel by 11:09 on the Chicago Board of Trade. November futures for soybean delivery fell $0.11 (1.2 percent) to $9.25 a bushel.

Sugar dropped today, erasing previous gains, after new home sales in the U.S. tumbled, signaling that the economic recovery may stall. Markets were also bothered by slumping equities and falling crude oil prices. October delivery for raw sugar slipped $0.0011 (0.7 percent) to $0.1581 per pound on ICE Futures U.S.