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Sugar Rallies on Production Concerns

September 20, 2016 at 9:54 by Brent Lantzy

Front month Sugar #11 on the ICE is up 0.02 cents (0.09%) to 22.12 cents per pound as of 9:23 GMT on Tuesday, while the most actively traded March 2017 contract is down 0.03 cents (0.13%) to 22.72 cents per pound.

The contracts posted their largest single day increase in four years on Friday, settling up by over 6%. Monday’s session added another 0.32 cents (1.47%) to the October contract, and 0.28 cents (1.25%) to the March 2017 contract.

Commerzbank lifted its forecast for raw sugar futures, predicting prices at 21.0 cents per pound lasting through the first quarter of 2017, according to an report, a figure that is lower than any of the current contract prices. From the report:

The fact that we expect to see slightly declining [sugar] prices in the [October-to-December] quarter has to do with the beet harvesting and sugar production at that time in key producer countries in the northern hemisphere, and with the expectation of the Brazilian real depreciating again.

A definitive rationale for sugar’s breakout is undefined, yet many traders point to disruptive rains in Brazil and predicted global production deficits in upcoming years as likely culprits. However, a weakening real may work to push prices downward.

ICE white sugar futures for December delivery are up $1.20 to $588.60 per ton as of 9:22 GMT, with the March 2017 contract up $2.40 to $591.00 per ton.

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