LONDON: Raw sugar futures on ICE rose on Monday, heading away from last week’s one-month low as oil prices jumped back above USD100 a barrel after peace talks between the US and Iran over the weekend broke down.
Higher energy prices are bullish for sugar because they can prompt cane mills in top growers Brazil and India to lower sugar output in favour of ethanol, a cane-based biofuel.
Brazil, for one, has said it wants to raise the mandate for the amount of ethanol to be blended with gasoline from 30 percent to 32 percent, given the Iran war’s impact on energy prices.
SUGAR: Raw sugar edged up 0.1 percent to 13.76 cents per lb at 1528 GMT, having hit its lowest since early March on Friday.
Brazil’s ethanol makers said on Friday they are ready to raise output if the government, as planned, hikes the ethanol blend mandate to 32 percent in the first half of the year.
Broker StoneX said the recent raw sugar price drop coupled with the depreciation of the dollar represents “an excellent buying opportunity for industries”.
A weak dollar makes dollar-priced sugar cheaper for non-US currency holders.
Limiting gains in sugar however, the market is widely expected to record a surplus this season.
Next season however, tightening is expected as the El Nino weather phenomenon is forecast to develop from mid-year onwards.
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