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Sugar Slumps to 12-Year Low on Global Supply Glut

July 17, 2019 at 14:20 by Andrew Moran

Sugar futures are losing their sweetness as the latest data suggest that the market is drowning in sugar inventories. As several major producers are expected to ramp up output, traders have become more bearish, a trend that was first noticeable after prices peaked at 23 cents at the start of 2017.

October sugar futures tumbled 0.04 cents, or 0.33%, to 11.95 cents per pound at 14:01 GMT on Wednesday on the US ICE Futures exchange. Sugar has had an uneventful year so far, sliding about 5% and not experiencing the slightest of momentum. The agricultural commodity is already on track for a weekly loss of nearly 5%.

The main problem for sugar is supply. There is a global supply glut that is undermining futures contracts and the biggest markets are not slowing down output volumes anytime soon. In fact, sugar exchanges have been swamped with expiring stockpiles.

A culprit for these ample supplies in international markets is India. The developing country has been subsidizing sugar exports to support its industry, but rivals, including Australia and Brazil, have accused the government of violating World Trade Organization (WTO) protocols. These agricultural adversaries have submitted complaints to the WTO. But Indian officials have confirmed that while they will maintain the subsidy program, the government will modify how they are distributed.

Industry leaders did not say what changes will be made, though they did note that they will seek guidance from WTO experts.

Despite monsoon rains lowering production levels, they are still at record highs, contributing to sinking prices. As a result, farmers are getting pummeled, prompting the state to intervene and pay money owed to sugar growers, who are considered an important voting bloc. New Delhi announced that it will offer incentives and establish an export target of five million tonnes for the 2018–2019 marketing year as part of a bid to pare rising inventories and reduce debt.

In other agricultural markets, August corn futures rose $0.0225, or 0.51%, to $4.435 per pound. September wheat futures tacked on $0.0075, or 0.15%, to $5.0825 a bushel. September soybean futures dipped $0.0075, or 0.08%, to $9.0525 per bushel.

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