NEW YORK/LONDON: Raw sugar futures closed up on Friday with the market boosted by a potential shift toward more ethanol production at the expense of sugar in Brazil after state-run oil company Petrobras raised fuel prices.
May raw sugar rose 0.14 cents, or 0.7%, at 19.24 cents per lb. Dealers noted higher fuel prices in Brazil were effective on Friday.
“Ethanol parity in sugar equivalent terms would move to around 20 c/lb if the (gasoline) price increase was passed on to ethanol in full, and that may well happen in the short term as ethanol market sentiment is definitely bullish,” said Eder Vieito, an analyst with Green Pool.
The fuel price hike in Brazil could drive a sizeable reduction in the amount of sugar the country - the world’s largest supplier - will ship abroad during the new crop season that starts in April.
“The gasoline price rise will mean that ethanol prices rise too, providing a stronger bid for all that cane juice when Center-South Brazil’s harvest kicks off next month. And it also validates the sugar market’s move from lingering just below 18 cents up to over 19 cents this month,” Commonwealth Bank of Australia analyst Tobin Gorey said in a note. May white sugar rose $2.70, or 0.5%, at $530.20 a tonne.
May London cocoa fell 16 pounds, or 0.9%, to 1,788 pounds per tonne after earlier climbing to a four-week high of 1,808 pounds. Dealers said the weakness of sterling against the dollar on Friday helped to underpin prices.
The market also continued to derive support from tightening global supplies driven partly by a drop in production in No. 2 grower Ghana. May New York cocoa fell $63, or 2.3%, to $2,620 a tonne.
May arabica coffee fell 2.25 cents, or 1.0%, at $2.2195 per lb. Favourable crop weather in top producer Brazil has helped to put the market on the defensive along with worries about demand from Russia, a large coffee importer. May robusta coffee rose $2, or 0.1%, at $2,095 a tonne.