Sugar traders are the most bullish in six months after prices moved to within five 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 15 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 6.7 percent lower since the start of the year at 21.74 cents by 4:44 p.m. in London, extending a 27 percent retreat in 2011. If it closes at that price today, it would be a 15 percent gain since June 4.
The Standard & Poor’s GSCI Agriculture Index of eight commodities rose 8 percent after grain prices rallied because a U.S. heat wave is wilting crops. The MSCI All-Country World Index of equities advanced 3.7 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.
China, the third-biggest user after India and the European Union, may import the most in 17 years in the 12 months ending in September as the government replenishes stockpiles, according to the median of eight trader and analyst estimates compiled by Bloomberg last month. Shipments may jump 43 percent to 3 million tons.
The options market is also signaling a more bullish outlook. Daily trading volumes for the option conferring the right to buy at 22 cents by late September averaged about 21 contracts in the four months through April, ICE Futures U.S. data show. That jumped to 4,213 contracts on June 21 and was 2,581 on July 3. The price of the security climbed more than tripled in the past month.
Sugar slumped 40 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 5.8 million tons in the season ending in September, compared with about 500,000 tons a year earlier, Macquarie estimates. The bank predicts that will narrow to 2.8 million tons in 2012-13.
Prices rose to a six-month high of 31.85 cents in August 2011 because of disruptions to Brazil’s harvest. The size of the anticipated glut may mean that won’t be repeated this time.
“The big difference this year is we were not in much of a surplus last year, but this year we are,” said Kona Haque, an analyst at Macquarie in London. While rain reduces the sucrose content of cane, the return of dry weather would limit the impact and mills could keep processing beyond the normal end of the season in November, she said.
In other commodities, 18 of 27 traders and analysts surveyed by Bloomberg expect gold to climb next week and three were neutral. Futures on the Comex exchange in New York are up 1.4 percent since the start of January at $1,588.10 an ounce. Holdings in bullion-backed exchange-traded products reached a record 2,413.6 tons July 5, data compiled by Bloomberg show.
Twelve of 26 people surveyed said copper will decline next week and 10 predicted gains. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, fell 0.9 percent this year to $7,535 a ton.
Corn and soybeans traders are bullish for an 11th week on concern that hot, dry weather in the U.S. Midwest will hurt crops. Seventeen of 29 people surveyed anticipate higher prices for both commodities next week and 10 were bearish. Corn rose 7.5 percent to $6.95 a bushel this year as soybeans climbed 25 percent to $15.1675 a bushel.
The S&P GSCI gauge of 24 commodities jumped 8.5 percent since closing at a 20-month low on June 21 as European leaders moved to contain the region’s debt crisis and central banks worldwide sought to shore up growth.
China said yesterday it will cut benchmark interest rates for the second time in a month from today. The European Central Bank cut rates to a record-low 0.75 percent from 1 percent and the Bank of England restarted bond purchases two months after halting its expansion of stimulus. Federal Reserve policy makers are scheduled to announce a rate decision Aug. 1.
“Stimulus expectations, with primary focus on the ECB cut, took over from post European Union summit optimism early this week and have been driving commodity prices higher,” said Filip Petersson, an analyst at SEB AB in Stockholm. “To keep markets optimistic, we need more than stimulus efforts.”
Gold survey results: Bullish: 18 Bearish: 6 Hold: 3 Copper survey results: Bullish: 10 Bearish: 12 Hold: 4 Corn survey results: Bullish: 17 Bearish: 10 Hold: 2 Soybean survey results: Bullish: 17 Bearish: 10 Hold: 2 Raw sugar survey results: Bullish: 9 Bearish: 2 Hold: 0 White sugar survey results: Bullish: 9 Bearish: 2 Hold: 0 White sugar premium results: Widen: 5 Narrow: 1 Neutral: 5