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Sugar Surges Nears 20 Cents on Supply Deficit and Rising Demand

June 8, 2016 at 23:40 by Brent Lantzy

July US Sugar #11 futures surged to the highest level in more than two-and-a-half years on Wednesday, briefly touching 19.76 cents per pound before settling at 19.67 cents, up 0.67 or 3.4%, according to data obtained from the Intercontinental Exchange (ICE).

The recent spike has been buoyed by harvest disrupting rains in Brazil, the rising Brazilian real to US dollar exchange rate, a forecasted supply deficit for 2016, and a marked increase in fund buying. Prices have increased over 50% from yearly lows reached in late February, and are up over 35% from the beginning of the year.

In an interview with Reuters, Piero Carello of Olam International predicted the global sugar deficit rising to 7 million tons in 2016–17 from a deficit of 4 million tons in 2015–16, noting that Asia-driven consumption rises of around 2% per year have boosted demand the most.

Hedge funds and other large speculators have increased their net-long positions by 4.9% to 222,686 in the week ended May 31, according to the CFTC’s Commitments of Traders report. This represents the highest level since the data begins in 2006.

Bloomberg reports Brazilian sugarcane processors Indoor Bounce House For Toddlers have switched to ethanol production due to enticing fuel margins thanks to rising oil prices, which means sugar output has remained flat in the world’s largest raw sugar producer.

Traders will be looking for a close above the important psychological level at 20 cents in the coming sessions to determine how much longer the rally will be sustainable.

August white sugar futures settled up 2.78% at $528.60 per ton on the ICE.

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