Sugar prices edged up Wednesday, as a new sugar deal between the U.S. and Mexico helped reduce some of the concerns over a global surplus of the sweetener.
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Raw sugar futures for July delivery added 1% to 14.12 cents a pound on the ICE Futures U.S. exchange.
After a lengthy negotiation, the U.S. and Mexico reached an agreement that reduces the allowed amount of refined sugar for Mexican imports from 53% to 30%, but maintains the access for Mexican sugar to the U.S. market. The deal would essentially reduce the chances that Mexican sugar would be diverted onto global markets, which provided some support to world sugar prices over recent sessions.
Meanwhile, Brazil's Copersucar S.A., one of the world's largest sugar and ethanol producers, reduced its outlook for the country's sugar production in the 2017/2018 crop due to a steep drop in sugar prices, according to Reuters.
The company cut its estimate for Brazil's center-south sugar production to 35.5 million tons from 36 million tons, arguing that mills in the region would switch to produce more ethanol, instead of sugar if the fuel fetches better returns than the sweetener.
However, "unfortunately for the bulls, sugar is not receiving much support from other markets," said James Liddiard, an analyst with Agrilion Commodity Advisers, in a note to clients. A further rally of sugar was somewhat uncertain, as the Brazilian real was weakening, crude and most of the soft commodities also all lowering, and the hydrous parity price in CS Brazil having fallen to 12.90 as of Tuesday night's close, he added.
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Despite the lower projections for Brazilian sugar output, India, the world's second largest sugar producer, is now seen increasing its output.
The Indian Meteorology Department (IMD) raised its monsoon rainfall forecast for this year to 98% of the 50-year average, which improves the chances that both this season and next season's Indian sugar production will come in above 25 million tons, according to Kamal Jain Trading Services Pvt. Ltd. in India.
In other markets, cocoa for July fell 0.6% to $1,963 a ton, arabica coffee for July added 0.4% to $1.2610 a pound, frozen concentrated orange juice for July fell 0.5% to $1.3185 a pound and July cotton fell 0.4% to 75.75 cents a pound.
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(END) Dow Jones Newswires
June 07, 2017 13:22 ET (17:22 GMT)