Raw sugar prices tumbled over 2%, as hedge funds continue to pile out of the commodity, despite the rapidly slowing sugar output in the Brazilian cane belt.
After Friday’s sell-off, sugar futures have broken below the 50-day moving average for the first time since August.
The latest Commodity Futures Trading Commission showed that speculators once again cut their bullish bets on sugar, drawing down the size of the net long.
But Tobin Gorey, at CBA Commodities, warned that the “investor’s long position is probably still huge”.
“And, when the market is faltering, the position lacks a raison d’etre.”
And although the global sugar market is likely to be in deficit this year, broker Marex Spectron said “the market’s attention is now moving to focus on the probable 2018 surplus”.
Slowing cane crush
Weekly data out from the Brazilian cane body Unica provided little support.
True, the data showed a rapid fall-off of cane crushing in the Brazilian Centre South cane belt, as mills close for the season due to low cane yields.
But the mills that are open are producing large volumes of sugar.
Mills close for the year
The total volume of cane crushed sharply month-on-month, down some 10.3m tonnes, to 31.0m tonnes.
This is down 11.9% year-on-year, and comes in short of analysts’ projections.
“In the first half of October, 13 mills closed for the 2016-17 harvest,” Unica said.
This means that 31 mills have now closed down for the season, much faster than last year when rain delays kept the pace of the crush closed.
Heavy sugar output
But where cane is being crushed, large volumes of sugar are being produced, because of the relatively high price of the sweetener which discourages cane being diverted to ethanol production.
And after a relatively drier year, the proportion of sugar available in cane is higher as well.
Sugar production was seen at 2.2m tonnes, down from 3.0m tonnes in the second half of September.
This was up some 6.8% year on year, despite the lower volume of cane being crushed, although a touch behind analyst expectations, with a Platts survey of analysts showing sugar production at 2.33m tonnes.
Cumulative sugar production so far this season is some 18% up year-on-year, at 30m tonnes.
March raw sugar futures in New York were down 1.9%, at 21.74 cents a pound, in morning deals.