Sugar Futures Rise Following Big Delivery

By Julie Wernau Features Dow Jones Newswires

Sugar futures rose Monday following a 1 million ton sugar delivery against the October contract, a sign of last resort, according to traders who say the market is oversold.

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Raw sugar for March was up 1.5% to end at 14.31 cents a pound on the ICE Futures U.S. exchange.

"Bulky deliveries such as this occur when the physical market is uninteresting enough to make the deliverer use the exchange as a last resource," said Arnaldo Luiz Corrêa, director of Archer Consulting in Brazil.

The sugar market is moving into the final quarter of the year, which typically carries higher prices. Over the last five harvests, the average price for October on the futures market was higher than in September, Mr. Corrêa said, and prices have been 87% better over the last 15 harvests. He forecast an average price of 15.37 cents a pound for the month.

In a note Monday, Societe Generale SA pointed to sugar as one of the most "oversold" commodities, suggesting that prices will rise. The market is beginning to see forecasts trickle in for the 2018/2019 season and traders have pointed to higher prices recently for ethanol in Brazil as a sign that less sugar will be produced as cane producers convert more cane to ethanol.

Ethanol parity--the price of ethanol converted into sugar prices--has been above the price of sugar for more than a month, according to Sucden Financial. However, bears in the market are pointing to the fact that recent reports out of Brazil, the world's largest growing region, have pointed to ample supplies of sugar.

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Mills in the world's largest sugar-producing region crushed 45.4 million metric tons of cane in the first half of September, a rise of 20% from the same period a year earlier. Sugar production rose to 3.1 million tons, up 29.2%, and ethanol output rose 30.3% to 2.1 billion liters. The production mix for the first half of this month was 48% sugar to 52% ethanol. The results were slightly more bearish than what the analysts expected, according to a survey by S&P Platts Kingsman.

In other markets, cocoa for December was off 0.3% to end at $2,037 a ton, arabica coffee for December lost 0.7% to settle at $1.272 a pound, frozen concentrated orange juice for November rose 3.1% to end at $1.53 a pound and December cotton lost 1.3% to close at 67.57 cents a pound.

Write to Julie Wernau at julie.wernau@wsj.com

(END) Dow Jones Newswires

October 02, 2017 15:37 ET (19:37 GMT)