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Sweet or Not? A Closer Look at Sugar Commodity Prices for June 23

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Sugar prices

In the week ended June 23, 2017, the near-month futures for sugar No. 11 and No. 5 contracts trended downward, a pattern observed since the beginning of this year. Sugar No. 11 is traded in the US while sugar No. 5 is traded in London. The numbers 11 and 5 refer to the structure of shipping costs for these commodities.

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Weekly movements

During the week ended June 23, the near-month sugar No. 11 futures contract closed at ~13.0 cents per pound, which was about 3% lower than ~13.4 cents per pound on June 16. Last week, sugar No. 11 futures traded 3.3% lower week-over-week on an average.

Sugar No. 5 closed at $395.50 per metric ton, which was down 93 basis points from $399.20 per metric ton a week ago. On an average, last week’s sugar No. 5 was down 94 basis points week-over-week.

Forward curve

The forward curve, which is key in determining hedging strategies for sugar-consuming companies (SGG), had an upward-sloping forward curve, meaning the market was trading in contango. These sugar-consuming companies include Tootsie Roll Industries (TR), Rocky Mountain Chocolate Factory (RMCF), Mondēlez International (MDLZ), and Hershey (HSY).

In contrast, the sugar No. 5 forward curve shows that the near-term futures (expiring in July) are currently trading at higher levels than the futures in expiring from October 2017 to August 2018.

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