Sugar futures accelerated their recovery, despite data showing that Brazilian sugar output accelerated faster than investors had expected, as cane millers made the most of dry weather.
New York raw sugar futures for October rose 2.8% at one point to 11.75 cents a pound, before easing back to 11.70 cents a pound after the data from Brazilian cane industry group Unica were released.
The recovery in the contract was attributed largely to the further revival in oil prices, whose tumble had been viewed as fuelling sugar’s fall on Wednesday to a 10-month low of 11.27 cents a pound.
Brent crude stood up 2.6% at $58.85 a barrel, taking to 5.3% its recovery from its own seven-month low reached on Wednesday.
“The recovery in oil prices has encouraged a bit of profit-taking” by funds who were believed to have ramped up short bets during the early-week price tumble, a London trader told Agrimoney, viewing technical factors as encouraging the move.
“It looked like there was a lot of movement after the price moved beyond the Fibonacci point” – ie after it topped the level a bit above 11.50 cents a pound that meant futures had recovered 23.6% of their latest decline, a key number of followers of Fibonacci analysis.
Brazil sugar output rises
Prices remained strong even after data from industry group Unica showed cane millers in Brazil’s Centre South region, responsible for more than 90% of the country’s output, produced 2.48m tonnes of the sweetener in the second half of last month.
That was the best performance of any half-month so far this season, which started in April, and represented a 28% surge on output in the first half of July.
It was also marginally ahead of a 2.40m-tonne number forecast by an investor poll by S&P Global Platts, although ermained behind the 2.62m tonnes produced in the second half of July last year.
Sugar vs ethanol
However, investors took note of the fact that the proportion of cane turned into ethanol in the second half of last month remained depressed, at 37.0%, and was indeed slightly below the market forecast.
The trader said: “It is not as if there has been some rethink, and a move away from ethanol,” which sugar competes with for cane.”
Furthermore, Unica - reporting a drop of 6.1% year on year to 141.30 kilogrammes per tonne of crop - highlighted some damage to the cane from recent frosts.
“This reduction of almost 10 kilogrammes in the quality of the raw material is due, in part, to the frost that reached about 400,000 hectares of sugarcane plantations in the Centre South,” said Antonio de Padua Rodrigues, the Unica technical director.
“The phenomenon forced many mills to harvest affected crop before the plant reached its ideal stage of maturity.”
‘Driest two weeks so far’
The growth in sugar output despite this dynamic reflected a cane crush during the second half of last month which, at 49.69m tonnes, was also the highest of the season, and well ahead of market expectations of a 48.0m-tonne figure.
The strong crush was spurred by drier conditions, which allowed an acceleration in harvesting.
“The second half of July was the driest two weeks so far this year in Centre South Brazil, with rainfall at just 0.75mm, about 95% below the norm and with rainfall of less than 1mm in all the top six sugar-producing states,” S&P Global said.