November 17, 2016 (Sugaronline) | https://goo.gl/UrHGn2
Sugar prices plunged Wednesday as investment funds ran for the exit amid wild currency swings in Brazil and China that were churning the global sweetener market, according to Dow Jones.
Raw-sugar futures for March delivery fell 3.7% to settle at 20.36 cents a pound on the ICE Futures U.S. exchange, the biggest one-day loss in percentage terms since July.
A confluence of bearish factors came to surface in recent days, putting strain on sugar, which had been a hot commodity attracting traders from all stripes. Sugar had soared 56% this year before reaching a four-year high of 23.81 cents in early October.
Since Donald Trump won the U.S. presidential election, the Brazilian real and the Chinese yuan have weakened sharply against the dollar, in part due to fears over the president-elect's trade-protectionism rhetoric. A cheaper real encourages exporters in the world's largest sugar grower to sell more into the global markets to fetch more revenues in local-currency terms, and a weaker yuan reduces the purchasing power of the world's largest sugar consumer in the dollar-denominated market.
The real has weakened 7.5% against the dollar since Nov. 8, while the yuan fell 1.4.
"Finally, the election tipped the scale," said Michael McDougall, director of commodities at Societe Generale.
Industry analysts have been warning against a correction in the crowded market, but speculators continue to double down. They increased their bullish bets in the week ended Nov. 8 to about 280,000 lots, 20% higher than the previous historical high, according to the latest U.S. official data.
A day earlier, the ICE London exchange saw the largest delivery of white sugar in more than nine years against the expired December contract, with 535,850 metric tons tendered.
"The record delivery yesterday was not a good sign as well," McDougall said. Demand for the refined, white sugar was a supporting factor for the raw sugar, but the big offtake from the exchange suggested that "they can't find a place for all the whites they produced and you can see a dropoff in demand," he said.
Phil Pia at Agrilion Commodity Advisers said a report from Brazilian industry group Unica fell within expectations this morning. He attributed the sell off to technical triggers in the market. "It started yesterday and broke through technical supports," he said.
With the cane crush season in Brazil winding down, the market will now look to the start of the crop seasons in Thailand and India, he said.