Sugar traders most bearish since April on Brazil

Prices had entered a bull market on July 9

Sugar cane Sugar cane

July 27 (Bloomberg) -- Sugar traders are the most bearish in three months on speculation that drier weather will accelerate harvesting in Brazil, the world’s largest producer.

Ten of 16 analysts surveyed by Bloomberg said they expect raw sugar to drop next week and three were bullish. A further three were neutral, making the proportion of bears the highest since April 13. Sugar output in Brazil’s center south, the biggest producing region, rose 2 percent in the first half of this month, industry group Unica said July 25. Cane-growing areas will be mostly dry through the start of August, according Somar Meteorologia, a Sao Paulo-based weather forecaster.

Prices rebounded from a 21-month low last month and entered a bull market on July 9 after rain in May and June delayed Brazil’s harvesting and exports. Sugar is now poised for its worst weekly performance since March as the drier weather eased concern about the crop and refocused attention on the prospects for a glut. Czarnikow Group Ltd., which traded the commodity in 90 countries last year, is forecasting a second consecutive surplus in the season that starts Oct. 1.

“The harvest in Brazil is catching up and that is a good bearish signal for the market,” said Jonathan Bouchet, a trader at Boman Capital SA, a Geneva-based hedge fund. “The weather in South America at the moment is adequate to harvest and ship, which will increase supplies and keep pressure on prices.”

Standard & Poor’s

While raw sugar rose as much as 27 percent since June 4 on the ICE Futures U.S. exchange, futures are still 3.7 percent lower for the year at 22.44 cents a pound. The Standard & Poor’s GSCI gauge of 24 commodities fell 0.9 percent and the MSCI All- Country World Index of equities gained 3.3 percent. Treasuries returned 3.2 percent, a Bank of America Corp. index shows.

Sugar also jumped in the past several weeks as India’s monsoon, which brings 70 percent of the country’s rain, was 22 percent less than average in the June 1-July 23 period, according to the national weather office. The monsoon deficit will probably narrow, the India Meteorological Department’s Director General L.S. Rathore said yesterday. India is the world’s second-biggest sugar producer.

Rains that delayed the harvest in Australia are ending, and should allow mills in the Burdekin area, accounting for 40 percent of the country’s sugar output, to re-open by early next week, Australia & New Zealand Banking Group Ltd. said in a report yesterday. Australia is the third-biggest exporter.

Weather Patterns

Thailand, the second-biggest exporter, had 50 percent to 75 percent of its normal precipitation this month, according to Falls Church, Virginia-based Computer Sciences Corp., which provides services including tracking weather patterns using satellite data. That may ease as tropical storm Vicente brings more rain this week, the Thai Meteorological Department said July 24.

Global sugar stockpiles will reach a four-year high of 31.6 million metric tons by the end of the 2011-12 season and climb another 4.7 percent in the following year, according to the U.S. Department of Agriculture.

The commodity slumped 38 percent since reaching a 30-year high of 36.08 cents in February 2011 as farmers from Thailand to Brazil planted more cane. Global output will exceed demand by 8.4 million tons in the 2012-13 season, according to Czarnikow, which had sales exceeding $3 billion in physical trading last year. Production in Brazil’s center south from July 1 to 15 rose to 2.64 million tons, Unica said.

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