Brazilian cane mills hedged more than a third of exportable new crop sugar on the ICE in New York, as a weaker currency despite the recent retreat by futures maintained the outlook as favorable for prices, Archer Consulting said on Thursday.
Brazilian mills sold forward in New York 9.4 million tonnes of 2017-18 sugar by the end of November, or 35.6 percent of estimated exports, Archer said. It is the highest volume of fixation for the period on record, surpassing last year's 31 percent volume at this time. "As we have seen recently, high New York prices combined with the dollar's upward curve encouraged mills to anticipate their fixations," said the report.
"The percentage would be higher were it not for the restriction of credit by the trading (houses) to the neediest mills," said Archer, referring to a move by some commodities traders in Brazil to limit their exposure to financially troubled sugar mills. Brazilian sugar producers are taking advantage of high values in reais for raw sugar to price as much of next year's expected output as possible. Analysts estimate that current values, despite the recent retreat caused by fund selling, are still very profitable for mills.
Raw sugar futures on Thursday settled 0.9 percent lower at 19.45 cents per lb. Prices slid 20 percent from early October to early December. Archer said the average price for sugar fixings is estimated at 17.34 cents per lb, considerably lower than the front-month contract in New York, but still advantageous.
Despite favorable market conditions for mills in recent months, many companies in the sector in Brazil are still trying to recover from a prolonged period of low sugar and ethanol prices that drove close to 100 mills out of business or into court-mandated debt restructuring.
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