RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

ANZ underlines caution at sugar price downturn

Twitter Linkedin eCard

Australia & New Zealand Bank, highlighting dryness in Brazil, hardened its caution over betting on further drops in sugar prices, even as prices fell below 15 cents a pound for the first time in more than three years.

ANZ senior ag economist Paul Deane underlined a warning that Brazilian dryness poses a risk to ideas of a further decline in sugar prices, which are already trading at amongst their lowest levels since 2010.

While the sugar market "has taken little notice" of below-average rainfall in Brazil's key Centre South region over the past six weeks, it represents a growing threat to hopes for a rise in sugarcane output in 2014-15.

"With little rain forecast over the next fortnight in the region, the chances of Brazil's cane production being revised lower are increasing," Mr Deane said, flagging the potential impact on raising prices.

"For producers, it is this type of scenario which could well present better opportunities to hedge over coming months."

'Shorts now looking stretched'

As an extra concern for sugar bears, the dry spell comes at a time when they have a large net short position in New York raw sugar futures and options, questioning the appetite for further short bets, and leaving open the prospect of a spike in prices if these holdings are closed.

Forecasts for Brazil Centre South cane and (sugar) output 2014-15

Archer Consulting: 630m tonnes, (34m tones)

ANZ: 610m tonnes, (36.5m tonnes)

Bio Agencia: 600m tonnes, (34m-35m tonnes)

Safras e Mercado: 618m tonnes, (35m tonnes

"Funds are significantly net short for the first time in five months," Mr Deane said.

"With shorts now looking stretched, and sugar prices showing a very strong correlation to movements in fund positions over the last month, our bias would be to be tactically long rather than short if fund positioning was the only factor."

Poised for a rally?

The dynamics mean that "two key pillars are in place, leaving sugar potentially poised for a rally".

However, Mr Deane, while noting that New York raw sugar futures were nearing the low point he has forecast for prices in the first half of the year, stopped short of issuing a buying recommendation.

At Sucden Financial, Thomas Kujawa was less recalcitrant in foreseeing further pressure on prices for now, with the prospect of the annual Kingsman Dubai Sugar Conference, from February 8-11, a key event in the industry calendar, likely to allow bearish sentiment to remain in the ascendancy.

"We think little is going to change to the 'sugar story' until we get closer to the build-up to the Dubai convention," Mr Kujawa said.

"Bulls continue to be on the back foot. A test of 15 cents a pound seems likely in the short term."

Indeed, New York raw sugar futures for March temporarily fell below 15 cents a pound for the first time since June 2010, touching 14.97 cents a pound, before recovering some ground to close at 15.03 cents a pound, a drop of 1.3% on the day.

By Agrimoney.com

Twitter Linkedin eCard
Related Stories

Funds renew ag selling wave - leaving them open to 'precarious position' on soy

... and potentially leaving them vulnerable to short-covering drives in the likes of wheat, coffee and sugar too. Still, in cotton...

Brokers enter 2018 upbeat on ag market, lifting price hopes

The market is expected to perform far better this year than in 2017, FocusEconomics says, flagging price upgrades in a range of contracts - notably wool

Hedge fund position in numbers, for week to January 16

Markets extra lists the latest official data on hedge fund positions in ag commodity derivatives, and how they have changed week on week

Morning markets: Soybean futures gain on rising Argentina dryness worries

... at a time when hedge funds have a hefty net short in the oilseed. Could this end up prompting a price spike? Wheat futures get help from Black Sea cold concerns
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069