Sugar futures moved higher Friday on news that the Brazilian government had announced fuel taxes that are expected to boost demand for ethanol.
Sugarcane can be converted into sugar or ethanol, and when ethanol demand picks up, traders anticipate lower sugar production in Brazil, the world's largest growing region.
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Raw sugar for October delivery was up 1% at 14.55 cents a pound on the ICE Futures U.S. exchange.
The Brazilian government announced an increase in the tax on gasoline equivalent to 25 cents per liter, versus 4 cents per liter for ethanol. Also, Brazil's Petroleo Brasileiro SA (PBR), or Petrobras, announced a 0.1% increase in gasoline prices effective Friday.
The moves widened the difference in price between gasoline and ethanol.
The news came out after the market close on Thursday, and Sucden Financial Research said the reaction from the market was predictable, as the sugar market is heavily short-positioned and some speculators needed to cover those positions.
"We are somewhat underwhelmed by the follow through on yesterday's news," said Nick Penney, senior trader at Sucden, in a note, adding that while a few short positions were covered, the core short position of the market remains firmly in place.
As of last Tuesday, hedge funds and other money managers betting that sugar prices will fall outweighed the bulls by 117,551 contracts, according to the U.S. Commodity Futures Trading Commission.
In other markets, cocoa for September was up 0.7% at $1,970 a ton, arabica coffee for September rose 0.6% to $1.3585 a pound, frozen concentrated orange juice for September was up 2.5% at $1.29 a pound, and December cotton lost 2.1% to 67.54 cents a pound.
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(END) Dow Jones Newswires
July 21, 2017 11:33 ET (15:33 GMT)