Sugar bulls ascend as rain returning to top producer Brazil

October Weather

While all of September will still be drier than normal in Brazil’s cane-growing regions, wet weather in October may be 10 to 15 percent above average, Celso Oliverira, a meteorologist at Somar, said yesterday. World Weather Inc. forecast rain at normal levels in October, with precipitation increasing to 1.5 times to 2.5 times above the norm in November and December, Drew Lerner, president of the Overland Park, Kansas-based company, said yesterday. Rain in May and June that delayed the crop was more than double the average, according to Somar.

India is unlikely to export any of its 1.5 million-ton surplus in the fourth quarter and in the first three months of 2013, according to Manish Gupta, head of sugar trading at Singapore-based raw materials trader Olam International Ltd. Exports may emerge after there is more clarity on the size of the crop, he said in an interview on Sept. 1. In Thailand, the second-biggest sweetener exporter, production will be 9.5 million to 10 million tons in 2012-13, down from 10.2 million tons this season, according to Mitr Phol Sugar Corp.

Sugar Shorts

Large and small sugar speculators excluding index funds have been betting on lower prices for three weeks to Sept. 4, according to U.S. Commodity Futures Trading Commission data. Prices fell 3.9 percent in the week ended Sept. 4 as the net short climbed by more than 13 times.

Sugar may rise at least 2 cents a pound when investors return to buy futures to close bets on lower prices, according to Piromsak Sasunee, chief executive officer at the Thai Sugar Trading Corp., Thailand’s biggest exporter.

Prices may also gain if the Brazilian government raises the percentage of ethanol into gasoline back to 25 percent from 20 percent now, and rising corn prices result in more exports of the biofuel to the U.S. Both sugar and ethanol are made from sugar cane in Brazil. Corn has climbed 21 percent this year after the worst drought in the U.S. since 1956.

“If the government raises the mixture of ethanol into gasoline still this year as some expect, millers could take away some cane away from sugar production,” FCStone’s Lima said. “Rising corn prices may also mean that the Brazil could increase ethanol exports to the U.S.”

*T Raw sugar survey results: Bullish: 12 Bearish: 3 Hold: 3
White sugar survey results: Bullish: 12 Bearish: 3 Hold: 3
White sugar premium results: Widen: 6 Narrow: 3 Neutral: 9 *T

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