Sugar Slides to Five-Week Low as High Indian Output Jolts Market

Sugar slid after data showed Indian production is running well ahead of last season, deepening a slump that has futures down more than 13% from last month’s peak.

Raw sugar futures in New York fell as much as 3.7% to their lowest intraday price since Sept. 23. White sugar in London was also down.

India produced 845,000 tons of the sweetener this season to the end of October, more than eight times the output from the same period last year, data from the National Federation of Cooperative Sugar Factories Ltd. showed.

While mills have been crushing cane earlier than last year and the Indian government has taken steps to stabilize local supplies, the data rattled a market where prices had surged because of tight stockpiles in the top sugar-consuming country.

India’s strong start to the season is not a surprise, according to Delhi-based analyst Harsh Soni of Greenleaf Consultancy. “But when reality strikes, markets react,” he said.

Sugar had surged for much of the year, buoyed by fears that a super El Niño will curb yields and push the global market into a deficit. But the market has given back some gains as traders increasingly expect less demand for imports in India and also potentially more incentive for Brazilian producers to export given a recent rout of the country’s currency. 

The Brazilian real weakened again on Tuesday, which can encourage more farmer selling.

The selloff has been exacerbated by speculative funds, which recently piled into sugar to build their most bullish position in years, paring back those bets. The latest CFTC positioning report shows money managers trimming their net-long position to a four-week low through Oct. 27.

“Funds might be thinking about end-of-year profit taking. Not many bullish arguments these days,” said Claudiu Covrig, lead analyst at Covrig Analytics. Indian imports are unlikely until April and May next year, and local Brazil prices continue signaling tepid demand, he added.

One risk that could upend the recent selloff, according to analysts, is rains exacerbated by a strong El Niño further disrupting the cane harvest in top grower Brazil. Mills in the country crushed 18% less sugarcane in the first half of October than a year earlier.

“When you look at the fundamentals, nothing has changed,” said Arnaud Lorioz, chief executive officer of Paris-based brokerage Deepcore. “The question is at what time this snowball effect loses momentum.”

This article was generated from an automated news agency feed without modifications to text.