Sugar heads lower amid lowered output in Brazil

BY ONOME AMUGE

Raw sugar futures plunged at the closing session of the Intercontinental Exchange (ICE), pressured by a rising dollar, though concerns over declining output in top producer Brazil limited losses.

July raw sugar was down 1.2 percent to 18.32 cents per lb, while August white sugar lost 0.6 percent to $511.80 a tonne.

Market dealers observed that the sweet commodity is under pressure from risk-off sentiment in the wider financial markets, adding that fundamentals could be tightening as market players scale back their Brazil output estimates.

Louis Dreyfus, a commodities firm, projected that sugar output would fall to 29 million tonnes in the centre-south of Brazil, driven by a strong shift to ethanol production in the South American region.

This, it explained, is because Brazilian mills use cane to produce both ethanol and sugar, meaning higher ethanol output comes at the expense of sugar.

Meanwhile, Arabica coffee futures eased after gaining over seven percent by the close of the previous day as July arabica coffee dropped 1.7 percent to $2.1615 per lb.

Market watchers however raised optimism that prices will soon move in a bullish direction as a cold frost is expected to advance over top producer Brazil this week, keeping dealers on edge.

They further recalled that a similar weather condition last year pushed coffee prices to their highest level since 2011.

Robusta coffee prices however maintained positive valuation as July robusta coffee rose $69 or 3.4 percent to $2,078 a tonne.

In the cocoa market, July New York cocoa fell 1.7 percent to $2,446 a tonne, having hit a five-month low of $2,428 at the start of last week, while July London cocoa traded 0.7 percent lower at £1,780 per tonne.

Dealers attributed the drop in prices to a fall in global demand, impacted by the ongoing war in Ukraine.