Sugar bulls strongest in six months on Brazil rain

Sugar cane Sugar cane

July 6 (Bloomberg) -- Sugar traders are the most bullish in six months after prices moved to within three percentage points of exiting a year-long bear market as rain delayed cane processing in Brazil, the biggest producer.

Nine of 11 analysts surveyed by Bloomberg said they expect raw sugar to keep rallying next week and two were bearish, the highest proportion of bulls since Jan. 6. Futures reached an 11-week high of 22.69 cents a pound in New York yesterday. Hedge funds increased wagers on rising prices by 29 percent to the highest since April in the week ended June 26, U.S. Commodity Futures Trading Commission data show.

The sweetener has been in a bear market since September as forecasters from Rabobank International to Macquarie Group Ltd. predicted a third annual glut. Prices rallied 17 percent since the start of June after above-average rainfall in Brazil’s main growing region increased concern about shortages. Copersucar SA, which owns mills in the country, said July 2 it took delivery of about 112,000 metric tons of raw sugar against the ICE Futures U.S. exchange’s expired July contract.

“The sugar turnaround has been fast because the short-term supply issues in Brazil are bullish,” said Keith Flury, an analyst at Rabobank in London. “We are in a weather market.”

Raw sugar is still 5.1 percent lower since the start of the year at 22.11 cents by 1:09 p.m. in London, extending a 27 percent retreat in 2011. If it closes at that price today, it would be a 17 percent gain since June 4.

Brazil Production

The Standard & Poor’s GSCI Agriculture Index of eight commodities rose 8.5 percent after grain prices rallied because a U.S. heat wave is wilting crops. The MSCI All-Country World Index of equities advanced 4.8 percent and Treasuries returned 2 percent, a Bank of America Corp. index shows.

Brazil’s center south, which normally accounts for about 90 percent of the country’s output, will produce 485 million tons of cane in the 12 months through March 31, Macquarie reported June 11, cutting its previous estimate of 500 million tons. Rain forecast for today and the weekend will probably further delay harvesting until July 10, Somar Meteorologia, a Sao Paulo-based weather forecaster, reported July 2.

Sugar production in Brazil slid to a three-year low of 36.2 million tons in the 12 months that ended April 30, according to the U.S. Department of Agriculture. While the agency anticipates a third annual gain in global stockpiles, it is also forecasting record consumption of 163 million tons. Demand expanded every year since 1995, USDA data show.

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