Sugar futures ended lower Wednesday, following a slump in crude oil markets that had markets anticipating producers converting cane to sugar over ethanol.
Raw sugar for October was off 1.4% to end at 13.72 cents a pound on the ICE Futures U.S. exchange.
The move came despite news that Brazil's Petrobras Brasileiro SA, or Petrobras, was raising gasoline and diesel prices. Typically higher fuel prices push up ethanol, encouraging producers to convert a larger percentage of cane to ethanol.
However, Petrobras's 1.8% price boost Monday came after a 5.8% decline on June 30, leaving a net fall. Andy Duff, an analyst at Rabobank, said that with light trade on Monday and markets closed on Tuesday for the July Fourth holiday in the U.S., Wednesday is the first day the market has reacted to the news.
Howard Marella, president of futures investing firm Icon Alternatives, said traders were closely watching crude markets, which are correcting lower in step with sugar. Thin markets and heavy overseas trade this week, he said, are creating volatility. U.S. crude futures fell $1.94, or 4.12%, to $45.13 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell $1.82, or 3.67%, to $47.79 on ICE Futures Europe.
The sugar market is moving into a global surplus, with Rabobank estimating that the 2017/2018 global crop will outstrip demand by 2.7 million tons. Meanwhile, ethanol prices have been trending lower and are hovering around 13 cents a pound in parity terms, the firm said.
"Ethanol prices may not yet have reached their low point for the season," Rabobank noted, "and the potential for Brazil's political situation to undermine the country's currency is far from exhausted."
In other markets, cocoa for September fell 0.6% to end at $1,947 a ton, arabica coffee for September was up 1.8% to end at $1.30 a pound, frozen concentrated orange juice for September rose 4.3% to settle at $1.3935 a pound and December cotton was up 0.3% to close at 67.66 cents a pound.
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(END) Dow Jones Newswires
July 05, 2017 15:31 ET (19:31 GMT)