Raw sugar futures hit a fresh 34-month low on Tuesday, extending the previous session’s losses, as industry data showed sugar production in Brazil surged last month and the pace of the top producer’s bumper harvest picked up, dealers said.
Arabica coffee futures on ICE slid on expectations for a record “off year” crop in Brazil, and cocoa gained, with dealers monitoring the front month premium on Liffe.
July raw sugar futures on ICE Futures U.S. settled down 0.23 cent, or 1.3 percent, to 17.02 cents a lb, after touching 17.00 cents, the lowest price since July 2010.
It was the largest one-day loss in almost two weeks. Raw sugar prices have reached fresh lows over the past two sessions as forecasts for hefty output in Brazil began to be realized, dealers said.
Sugar production in Brazil’s main cane belt surged in April, outpacing last year’s early harvest, as rains cleared to allow crushing of the record crop to accelerate, industry association Unica said.
“Cane production is up, sugar production is up, and the ethanol mix wasn’t as aggressive as we thought,” said Michael McDougall, vice president for Newedge in New York.
Dealers previously said they expected mills to focus more of the cane harvest toward ethanol production than toward sugar after the Brazilian government mandated an increase in the amount of ethanol in its fuel blend.
A shift toward ethanol production was seen as supportive to sugar prices.
Prices slid for a second session as the bearish fundamental news prompted selling, dealers said.
“There is no notable support below these levels, until we hit the 2010 lows of 13 cents (spot contract), which means producers are likely to assess the current market with a fair degree of nervousness,” said Luke Mathews, commodities strategist at Commonwealth Bank of Australia.
Traders gathered for New York Sugar Week said they thought it likely global prices would trend toward 16 cents a lb.
August white sugar on Liffe was down $7.10, or 1.5 percent, to settle at $478.00 a tonne.