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Sugar Slides After Hitting Two-Week High

March 20, 2019 at 16:16 by Andrew Moran

Sugar futures are tumbling midweek after reaching their best levels in two weeks on Tuesday. The agricultural commodity is in the red as the market increases its net short positions. With an international supply deficit anticipated by the end of the growing 2019/2020 season, some analysts think that certain markets are offsetting the general trend of production cuts.

May sugar futures dipped 0.02 cents, or 0.16%, to 12.76 cents per pound at 15:32 GMT on Wednesday on the US ICE Futures exchange. Sugar prices are finally trading higher after posting three consecutive bearish years. Year-to-date, sugar is up more than 5%, though it is still down 11% in the last 12 months.

According to the US Commodity Futures Trading Commission (CFTC), money managers and hedge funds have increased their net short positions by 25% in the week ending March 12. This was more than expected and the highest since September 2018.

In recent months, the sugar industry has warned about a potential global supply deficit by 2020. Rabobank recently projected that the deficit would balloon to 4.3 million tonnes, driven mostly by declines in Europe and Thailand – there is a growing push in the European Union (EU) to curb production and imports for health reasons.

Analysts do note that the strength of the energy market could impact the sugar market, particularly in Brazil, where cane mills are taking advantage of higher crude oil prices by boosting ethanol output levels instead of sugar. Last season, Brazil slashed its sugar production by 26% as millers concentrated on ethanol, draining global output by 10 million metric tons.

But India is trying to offset the decline by making a bigger dent in the industry. The All India Sugar Trade Association (AISTA) projects that production totals will come in at 32.6 million tonnes by September 2019, up from previous estimates of 31.5 million tonnes.

In other agricultural commodities, May corn futures dipped $0.005, or 0.13%, to $3.7075 a pound. May wheat futures tacked on $0.035, or 0.77%, to $4.60 per bushel. May soybean futures rose $0.005, or 0.13%, to $3.11 a bushel. May orange juice futures edged up $0.005, or 0.35%, to $1.29 per pound.

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