August 3, 2015
Sugaronline | http://goo.gl/0Usq9m
Raw sugar prices broke below 11 cents a pound for the first time in six-and-a-half years Monday as the Brazilian real continued its slide against the dollar, according to Dow Jones.
Brazil is the biggest producer of the sweetener in the world, and when the real weakens against the dollar, the favourable exchange rate makes sales of dollar-denominated sugar more valuable in reais terms. The Brazilian real has dropped 10% in a month as investors grow increasingly concerned about the stability of Brazil's economy amid a political corruption scandal there.
Raw sugar for October delivery fell as low as 10.92 cents a pound on the ICE Futures U.S. exchange and was recently down 1.3% to 11 cents a pound, the lowest since Dec. 26, 2008.
"The futures sugar market in New York behaves like an endless rerun of a horror movie," Arnaldo Luiz Correa, director at Archer Consulting in Santos, Brazil, said in a note.
Mr. Correa said that over the last 20 sessions, the devaluation of the real has accounted for 60% of the fall in sugar prices, but he said the value of the commodity in reais per ton is less volatile. He said the contract could trade as low as 9.5 cents per pound, the lowest in seven years.
Sugar attempted a rally last week, reaching 11.64 cents a pound on Thursday, but failed and closed lower on the week. El Nino weather fears in major growing regions have been largely discounted at this point, as dry weather in Brazil is helping harvests and there are no longer fears of a "failed" monsoon in major sugarcane growing regions in Asia, Robin Shaw, analyst at Marex Spectron, said in a report.
"The dry weather in centre-south Brazil and the prospect of five millions tons of sugar being dumped out of the region every month during this peak period of the crop, coupled with the continuing weakness of the Real, did not give a rally much of a chance," Mr. Shaw said.