Sugar has perhaps been the most disappointing ag commodity for bulls in the last 12 and even 24 months, even amid the bearish mood exhibited by most soft commodities. (Some of the noncommercials that have been adding to their short positions in other markets may finally be losing their nerve there, too.)
Recent calls for an inevitable upward swing for sugar have been predicated on a lower sugar share of cane use in Brazil: Center-south cane use could shift even more markedly from sugar to ethanol manufacturing in the next crop season if ethanol prices remain attractive. Reduced Brazilian production would thus goose the slumbering world sugar price, shifting the market even if sugar production picks up for other origins like EU, Thailand, India, and China—or so the argument goes.
However, if Brazil lifts its duty on out-of-quota U.S. ethanol, as trade officials hinted earlier this month, ethanol manufacturing could lose some of its luster, making for a more modest dip in Brazil’s new-crop sugar output. This would make it likelier that the world sugar market remains comfortably supplied and would in turn make for a quiet and even boring year for world sugar.
Soft commodities: #11 world sugar vs. ag futures
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