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Sugar Futures Plunge as Investors Shed Long Positions

March 30, 2017 at 17:25 by Andrew Moran

Sugar prices are falling on Thursday as investors start to shed their long positions in favor of short calls. After Wednesday’s disappointing trading session, sugar futures have entered into a technical bear market, a trend that has encouraged a new bout of selling.

May Sugar No. 11 futures tumbled $0.30, or 1.75%, to 16.82 cents per pound at 16:54 GMT on Thursday on London’s ICE Futures exchange. Sugar prices are now trading at 10-month lows, and have been plunging since the middle of February when the commodity hit 21 cents. Following an impeccable 2016, when it hit a peak of 24 cents in September, sugar has been on a downward trend.

Investors had been betting that Cyclone Debbie in Australia would damage the nation’s sugar belt. Once it was reported that the $2 billion sugar industry was relatively unfazed by the weather events prices started to dip. Experts still contend that it may take weeks to fully assess the damage created by the cyclone.

Brazil is also about to begin its crush season, a time when sugar production is maximized.

Traders are taking notice that global supplies will only grow. Despite the slight rebound last week, producers and speculators have been selling their positions in sugar. Many investors have begun to decrease their long positions and increase their short positions.

Last year, the International Sugar Organization (ISO) projected that global sugar supplies and demand will return to balance in 2017/2018 due to normal weather conditions.

This comes as a new report from Public Health England (PHE) is encouraging the food industry to slash its sugar consumption. British public health officials want UK companies to reduce their sugar volumes by 5% in 2017 and another 20% by the year 2020. If businesses do take on this challenge then sugar content found in biscuits, chocolate bars, and cereals may be lower, reducing the national demand.

Dr. Alison Tedstone, PHE chief nutritionist, told BBC News that thousands of tonnes of sugar could be eliminated from the UK market in just three years.

Tackling the amount of sugar we eat is not just a healthy thing to do, but an issue of inequality for many families. If businesses achieve these guidelines, 200,000 tonnes of sugar could be removed from the UK market per year by 2020.

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