Sugar Traders Most Bearish Since May on Weakening Rupee to Real

Sugar traders are the most bearish in three months as weaker currencies in Brazil and India spur sales from the top growers and above-average monsoon rains improve the outlook for the crop in the South Asian nation.

Thirteen of 15 traders surveyed by Bloomberg said they expect raw sugar to fall next week and two were bullish. That’s the highest proportion of bears since May 10. The Brazilian real and the Indian rupee declined more than 7 percent in the past month, the worst performers in a basket of 24 emerging-market currencies tracked by Bloomberg. A weaker local currency boosts revenue of overseas sales priced in dollars.

The monsoon in India, the world’s second-biggest grower and largest sugar consumer, was 14 percent above average between June 1 and Aug. 21, according to the India Meteorological Department. Output next season may exceed this year’s, said Agriculture Minister Sharad Pawar. A weaker real means sugar is more profitable than ethanol in Brazil’s center south, the main growing region of the world’s leading producer, according to Lausanne, Switzerland-based researcher Kingsman SA.

“The monsoon has been good this year and the crop will benefit from it,” said Emmanuel Jayet, head of statistics and research in Paris at Sucres et Denrees SA, which ships more than 8 million metric tons of sugar a year. “We started with a conservative forecast of somewhere between 22 million and 23 million tons as the area has decreased but with this good monsoon we will likely have to have to increase our number.”

Ethanol Conversion

The amount of cane used to make sugar should increase from 45 percent seen in July, Jayet said, without providing a forecast. Brazilian hydrous ethanol, the kind used in flex-fuel cars, was trading at 16.02 cents a pound in sugar-equivalent terms, according to Fabienne Pointier, an analyst at Kingsman. Raw sugar futures closed yesterday at 16.28 cents a pound on ICE Futures U.S. in New York.

Global sugar supplies will be 4.5 million tons higher than demand in the 2013-14 season that starts Oct. 1, the International Sugar Organization in London said yesterday. That’s higher than a previous forecast of 3.5 million tons. Sugar, down 16 percent this year, is heading for a third year of declines, the longest slump since 1992.

India produced 25 million tons of sugar in the 2012-13 season ending Sept. 30, according to the Indian Sugar Mills Association in New Delhi. The nation will probably export 500,000 to 1.5 million tons of the sweetener next season because of a lower rupee and local surpluses, said Manish Gupta, head of sugar trading in India at Olam International Ltd.

Millers in Brazil’s center south will use 55 percent to 56 percent of all the cane harvested in the 2013-14 season that started there in April to make ethanol, according to Sao Paulo-based Copersucar SA. That is down from a June forecast of 57.5 percent. A weaker real has lowered the so-called ethanol parity, the price at which millers favor the biofuel over sugar, broker Marex Spectron Group in London said on Aug. 19.

“The extra exports from India and from the ethanol parity will put second half 2013, which had begun to look a little tight, firmly back into surplus,” said Robin Shaw, an analyst at Marex Spectron in London. “The fact that current sugar prices are well above the ethanol parity means that we have to accept that Brazil should produce an extra 2.5 million to 3 million tons of sugar compared with 2013.”

Raw sugar survey results: Bullish: 2 Bearish: 13 Hold: 0
White sugar survey results: Bullish: 2 Bearish: 11 Hold: 2
White sugar premium results: Widen: 4 Narrow: 3 Neutral: 8