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Sugar Prices Fell Due to Stronger Supply Cues from Brazil

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Sugar prices fell

Sugar No. 11 futures contracts on the Intercontinental Exchange, for March delivery, fell by 0.57% and settled at $14.02 per pound on January 26, 2016. Sugar prices fell due to stronger supply cues from Brazil. The iPath Dow Jones-UBS Sugar Subindex Total Return Service Mark ETN (SGG) fell by 0.66% on January 26, 2016.

On January 26, 2016, Unica reported that Brazil’s sugar output is strong. The group’s report highlighted that the sugarcane production for January 1–16, 2016, was 1.82 million tons. The sugar output was 29,000 tons during the same period. The ethanol production for the fortnight ending on January 16, 2016, rose to 92 million liters. The output of sugarcane and sugar rose. Unica expects that it could rise more. The strong production and supply from Brazil dragged sugar prices down on January 26, 2016.

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The weather in the key sugar producing regions in Brazil are projected to remain favorable for the week ending on January 30. The weather for the reported period is expected to bring precipitation in the sugarcane belt. The favorable rainfall would support the moisture requirements for sugarcane in the near term. In turn, it would support the output sentiment and sugar supply. The supportive weather conditions dragged sugar prices down on January 26.

The ethanol demand could be threatened in the near term. Petroleum and ethanol prices have a direct and opposite relationship. Petroleum prices are low. It could attract a higher demand switch from ethanol. The speculation of weaker ethanol demand supported sugar prices on January 26, 2016.

Stock discussion

The decrease in sugar prices would be negative for companies in the sugar producing business. In contrast, it supports the shares of companies in sugar confectionary products as it reduces the acquisition cost. Cosan (CZZ) didn’t change. It stayed at $2.87 on January 26, 2016. The share price of businesses including Hershey (HSY), Campbell Soup (CPB), and General Mills (GIS) rose by 1.6%, 0.99%, and 0.60% on January 26, 2016. The iShares MSCI China Index Fund (MCHI) rose by 0.68% on January 26, 2016, with the fall in sugar prices.

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