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Sugar Futures Hit Two-Month Low on Positive ISO Outlook

November 22, 2016 at 18:17 by Andrew Moran

Ever since hitting a four-year high last month, sugar futures have been tumbling. The paucity of supply and weak global demand are being attributed to the commodity’s declines. A new report does suggest, however, that demand could be on the rise again next year. This was not enough to help sugar make gains.

March Sugar No. 11 futures dipped 3.195% to 19.72 cents per pound at 16:48 GMT on Tuesday on the ICE Futures exchange. The last time sugar traded this low was at the beginning of September. Sugar has slipped roughly 16% since it reached a four-year high of just under 24 cents a pound on October 13.

Tuesday’s losses were due to investors taking money out of commodities, like sugar and cocoa, and putting these funds into the equities market, which has been soaring in November.

Despite the trend over the last month, sugar prices have surged more than 50% so far this year. Sugar has been on a tear in 2016 because of concerns over limited supplies in the 2015/2016 and 2016/2017 marketing years.

According to a new report from the International Sugar Organization (ISO), global sugar supplies and demand will return to balance in 2017/2018. The ISO cited normal weather conditions as the primary reason why the world’s production and demand of sugar will go back to normal. If the projections are correct, the run of deficits, which has left the world’s supplies at a “critically low level” for the last two seasons, will come to an end.

Any easing of price in reaction to expectations of a possible return of the world supply and demand to a more balanced scenario in 2017–18 may be muted.

With the positive outlook from the ISO, analysts in London suggest that sugar prices could fall further. They are also warning that the latest report will provide a signal for investors to sell their positions in sugar.

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