Sugar Prices Are at a Four-Year High

Raw-sugar prices extended gains to the highest in almost four years amid signs of near-term supply tightness and high energy prices that could stoke demand for cane-based ethanol.

Futures in New York rose to the highest since April 2017, on course for a 10th straight monthly gain that would be the longest run since 1961.

The surge comes even amid projections for a world surplus in the 2021-22 season that typically starts in April in Brazil. Part of the reason is that rising global oil prices and an increase in gasoline costs in top sugar exporter Brazil are underpinning the demand outlook for cane-based ethanol in the South American nation. Output declines in Thailand and the European Union have also supported prices this season.

“The valuation seems to reflect a ‘perfect storm’ of some other factors that go beyond the fundamentals,” Bruno Lima, head of sugar for StoneX Group in Sao Paulo, said in a report.

Sugar Prices Are at a Four-Year High

Raw sugar for May delivery jumped 1.8% to close at 16.89 cents a pound in New York after reaching 17.04 cents. For the week, prices rose 8%, the most since July.

March futures expire next week, and commercial traders tend to adjust positions before an expiry. A strong March premium over May indicates near-term supply concerns. At the same time, Brazil is set to start its harvest soon, India has big stockpiles to export and the North Hemisphere crops will start to trickle in over the coming months.

“The recent high, intense and in a short time, can last for a few more days, but it is a great opportunity for sellers, if they still have hedge availability,” Lima said. “The drop in prices must come, sooner or later, by a readjustment of positions, or by the fundamentals.”

©2021 Bloomberg L.P.

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