What Sugar High – US-FOREX.US
High-riding sugar futures finally slipped on Monday, as economic uncertainty weighed on commodity prices and investors tried to take profits. Sugar for October delivery shed 0.26 cents, to settle at 17.32 cents, on the IntercontinentalExchange. At the end of June, ICE sugar futures hit a three-month high at 18.09 cents. Analysts have been bullish on sugar, citing supplies that aren’t expected to meet demand. According to Barclays Capital Markets analyst Nicholas Snowdon, the sugar market deficit in the 2008/2009 harvest has lifted prices on the front-month ICE contract by nearly 50%-and fundamentals for the 2009/10 harvest are looking more enticing. Delayed Indian Monsoons and lower plantings resulted in lower output estimates for the 2009/10 harvest season, which is now projected at 16.5-17.5 Mt, from 19-20 Mt, previously. Weather could also push sugar prices higher. Current patterns suggest the possibility of an El Nino weather event, which, according to Snowdon, led to drought in India and heavier rainfall in Brazil in the past. Wet Brazilian weather ended the crush early, curtailing production.”This fundamental picture suggests that the greatest gains from current levels will be seen in the March/May 2010 ICE sugar contracts, when the market will be at its tightest,” Snowdon said.Shares of Cosan Limited
, a sugar and ethanol company with operations in Brazil, traded 20 cents lower, or 3.8%, at 5.05, during Monday’s afternoon trading session. Agricultural commodities traded broadly lower on Monday as the U.S. dollar strengthened.
Food companies were one of the day’s few bright spots as lower commodity costs can mean cheaper ingredients for companies like ConAgra Foods
, General Mills
, Kraft Foods
and Kellogg
.
Thomson Reuters contributed to this article.