Sugar to get boost from energy markets, biofuels policy in 2018: J.P Morgan

More upbeat global energy markets and constructive biofuels policies in Brazil are likely to lend support to sugar prices in 2018, J.P Morgan agricultural commodities strategist Tracey Allen said on Wednesday. After "one of the bleakest years of many" for agricultural commodities, the sugar market could be poised for a more positive period ahead, Allen said during the International Sugar Organization's annual sugar seminar in London.
"This sustained upswing in global energy prices really is in my view putting a bit of a floor in agri commodity markets, particularly in those that can be used in ethanol production," Allen said. More supportive biofuel policies in Brazil, which could boost the use of ethanol in the country, are also seen as lending some support to sugar prices as they would encourage mills to use more cane to produce ethanol rather than sugar.
"With the changes in fuel policy, particularly in Brazil, even in this price environment, it is sending very strong signals for the industrial use of cane for ethanol production in the future," Allen said. On Tuesday, Brazil's lower house of Congress approved a bill to set up a programme to give fuel distributors targets to cut carbon emissions, encouraging them to sell increasing volumes of ethanol and biodiesel in the coming years.
However, the global sugar supply and demand balance must normalise before investment begins to flow back and the sector returns to profitability, Allen said.