Sugar slumps amid excess supplies, trade tensions

02 Aug, 2019

SUGAR

* October raw sugar was down 0.2 cents, or 1.7%, at 11.91 cents per lb at 1355 GMT, having hit 11.89, its lowest since July 23.

* US President Donald Trump vowed to impose a 10% tariff on $300 billion of Chinese imports, escalating a bruising trade war and sparking a frenzied bid for safe-haven assets amongst international investors.

* Oil prices plummeted more than 7% in response to the news on Thursday, encouraging Brazilian cane mills to produce sugar rather than biofuel ethanol.

* A softer Brazilian real, which hit a near one-month low against the dollar on Thursday, also weighed - encouraging Brazilian traders to sell dollar-denominated commodities like sugar.

* Added to this, sugar traders are still digesting signs of plentiful near-term supplies, such as massive recent deliveries of sugar against ICE futures contracts and large global stockpiles.

* "Sugar's fundamentals remain bearish and this week in particular, the macro-economic news has been very negative," said Kona Haque, head of research at ED&F Man.

* Underpinning sugar, Brazil exported 1.69 million tonnes of raw sugar in July versus 1.71 million tonnes a year ago, data showed.

* Looking ahead, analyst Green Pool has raised its global sugar deficit forecast for the 2019/20 season to 3.67 million tonnes, raw value, from 1.62 million, citing reductions in crop forecasts for Centre-South Brazil and India.

* Also, the Philippines has approved the import of up to 250,000 tonnes of refined sugar to meet rising domestic demand amid a shrinking domestic stockpile.

* October white sugar was down $4, or 1.2%, at $321.60 a tonne.

COFFEE

* September arabica coffee fell 0.6 cents, or 0.6%, to 97.85 cents per lb after slumping to a six-week low of 96.60 cents on Thursday.

* Coffee is being driven down by broader macroeconomic influences and excess supplies in top producer Brazil.

* The expectation that funds could rebuild their net short position is also weighing.

* Fund short-covering had helped to fuel a rebound in prices during the past couple of months, but the run-up has stalled and the speculative net short has begun to rise again.

* Underpinning coffee prices, however, is the possibility of crop-damaging weather this weekend in Brazil. Forecaster Radiant Solutions elevated its frost risk assessment for Saturday and Sunday.

* September robusta coffee was up $6, or 0.5%, at $1,313 a tonne.

COCOA

* September London cocoa dipped 2 pounds, or 0.1%, to 1,821 pounds a tonne.

* London cocoa has been underpinned of late by weakness in sterling.

* September New York cocoa fell $1, or 0.1%, to $2,327 a tonne.

* The Indonesian province of Lampung exported 3,484 tonnes of cocoa beans in July, up sharply from 101.6 tonnes in July last year.

Copyright Reuters, 2019

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