A 13 percent rally in raw sugar futures in New York over the past month is likely to dent demand as buyers opt to wait for lower prices before stepping up purchases, according to Swiss Sugar Brokers.
Sugar climbed as rains in May and June delayed the harvest and shipments from Brazil, the world’s largest producer. Sweetener output in center south, the country’s main growing area, fell 28 percent to about 4.9 million metric tons through June 15, according to data from industry group Unica. Premiums to obtain sugar in the physical markets gave an incentive for buyers to take delivery on the ICE Futures U.S. exchange.
Copersucar SA, owner of sugar mills in Brazil, traders Cargill Inc. and ED&F Man Holdings Ltd. took delivery of about 1.1. million tons of raw sugar after the expiry of the July contract in New York. That was the biggest since 2009. Global supplies remain limited for now even as production is set to be 10.2 million tons higher than demand in 2011-12 and 9.3 million tons in 2012-13, broker and researcher Kingsman SA estimates.
“In a surplus market, buyers will either wait to buy if they have enough sugar in the pipelines, or just buy on spot hand-to-mouth basis,” Naim Beydoun, a broker at the Rolle, Switzerland-based Swiss Sugar Brokers, said in a report e-mailed yesterday.
Most of the sugar delivered on ICE will be loaded at Brazil’s second biggest port of Paranagua. Ships there were waiting to load 982,132 tons of the sweetener as of July 6, according to Unimar Agenciamentos Maritimos Ltda., a shipping agency in Santos, Brazil. That compares with 404,850 tons on June 29, prior to the delivery, the data showed.
“All receivers have nominated almost all of their delivered sugar in Paranagua,” Beydoun said, adding that this was adding to premiums. “No demand, no new business has been accounted.”
Raw sugar for loading after July 18 at the port of Santos traded at a premium of 0.58 cent a pound to the price of the October contract on ICE, Beydoun said. For loading in August, the sweetener was at a premium of 0.4 cent a pound and at 0.25 cent a pound for loading in September, according to the broker.
“We are hearing the problems that caused the strength in the run-up to the July expiry are now waning and apparently the cash premiums out of Brazil are sending bearish signals,” Thomas Kujawa, co-head of soft commodities at futures and options broker Sucden Financial Ltd. in London, said in a report e-mailed today.