Those who think there are no bull market stories in the commodity complex this year apparently have not been paying any attention to the sugar market. Sugar prices surged on Wednesday, for the second time in a week, as ongoing production issues around the globe continue to support expectations that there will be a shortage of sugar for the 2015-2016 season.
Sugar is currently trading over 16 cents a pound and at its highest price point since 2014 thanks to dry conditions in many producers including Brazil, India,Thailand, China and the Philippines. The weather effects in Asia are expected to be the worst while top producer Brazil is ramping up cane crushing faster than typical, which could exacerbate a late season shortage.
Brazilian cane mills have accelerated reopenings from seasonal downtime faster than expected to benefit from high prices and a weak real. These mills typically do not start production until April, and ramp-up it up in May, but they are already picking up speed. While this may mean more supplies in the near term, it could increase a price spike at the end of the season, particularly if supplies fall short as analysts are expecting. Rabobank has predicted that sugar consumption will likely surpass production by 6.8 million metric tons in 2015-16, 2.1 million tons higher than its prior projection.
Sugar prices show no signs of cooling down anytime soon. Hedge fund managers are holding net long positions in sugar futures of 100,000 contracts, and in addition to sugar prices, the funds that support sugar are also rallying. From the end of February through now, the iPath Dow Jones-UBS Sugar Subindex Total Return ETN surged over 30 percent.
Source: www.economiccalendar.com