Sugar prices rebounded on Wednesday from their five-week lows, closing with modest gains. March NY world sugar #11 (SBH24) on Wednesday closed +0.26 (+1.01%), and Dec London white sugar #5 (SWZ23) closed +2.10 (+0.30%).
The recovery was driven by short covering in sugar futures following reports from Rural Clima Meteorlogia, indicating that Brazil’s key sugar cane growing regions are expected to receive frequent rains through October. This raised concerns that the heavy rainfall could slow down sugar cane crushing operations and subsequently reduce sugar output.
The weakening of the Brazilian real against the US dollar, reaching a six-month low on Wednesday, had a bearish effect on sugar prices. A weaker real encourages Brazilian sugar producers to increase export selling, adding further downward pressure on prices.
Sugar prices initially rose but later retreated from their highs on Wednesday, influenced by a sharp decline of over 5% in crude oil prices, which reached a five-week low. Weakness in crude oil negatively impacts ethanol prices, potentially prompting sugar mills worldwide to shift their focus from ethanol production to sugar production, thus boosting sugar supplies.
Over the past week, sugar prices have faced downward pressure due to signs of increased sugar production in Brazil. Reports from Unica indicated an 8.5% year-on-year increase in Brazil Center-South sugar output in the first half of September, reaching 3.116 million metric tonnes.
