News
15.12.2009
Sugar hits record high as hopes for Brazil wane
Sugar hit a fresh record high amid expectations after Brazil, the world's biggest producer, cut output expectations further.
White sugar closed up nearly 4% at $650.90 a tonne in London after touching $652.80 earlier, the highest for a near-term contract since the commodity began trading in the City in 1983.
In New York, raw sugar for January ended up 5.5% to 24.61 cents a pound, within $0.25 of a 28-year high set in September.
"Although we did briefly pull back to the unchanged level, further funds buying and short covering has pushed values in the March [contract] higher," David Sadler at London-based Sucden Financial, said.
'Rained all over'
The buying followed an estimate by the country's agriculture ministry of production of 34m tonnes.
While a record high, it is far below initial estimates of about 38m tonnes.
Conab, Brazil's independent crop agency, also signalled that it was likely on Wednesday to lower its forecast for the South American country's 2009-10 output because of persistent rain.
"From September through November, it rained all over" Brazil's key Centre-South sugar-producing district, Luis Carlos Job, a Conab spokesman, said.
Raw vs white
While Brazil's travails have pushed up prices of both types of traded sugar, Mr Sucden pointed out that white's premium over raw, to account for processing costs, had fallen back as emphasis pointed back to tight supplies rather than demand for refined product from Pakistan
"The whites… are now certainly lagging as the March [white]/March [raw] premium has now narrowed into $102.00 a tonne and the May/May into $112.00 a tonne," he said.
"This likely represents the current situation with regards to the perceived tightening in raws supply for the Centre South Brazil, rather than the earlier expected demand for whites from India, Pakistan, Indonesia and Bangladesh."
Last week, Rabobank analyst Andy Duff highlighted the impact of hesitation by major importers in buying raw sugar at elevated prices on raised demand for white sugar.
"The delays in purchasing raw sugar today by importers that will have to come to the market at some point, most notably India and Pakistan, translate into a greater requirement for white sugar imports from the second quarter of 2010."
Agrimoney
