Sugar heads for weekly gains amid energy price surge, lower India output

LONDON: Sugar futures on ICE rose on Friday, heading for weekly gains of nearly 3percent, as the Iran war kept crude oil prices hovering near USD100 a barrel and dealers remained mindful of worse than expected output in No. 2 grower India.

Rising energy prices can prompt cane mills in top grower Brazil to cut sugar output and instead produce more ethanol, a cane-based biofuel.

SUGAR

Raw sugar rose 0.6percent to 14.47 cents per lb at 1324 GMT. Oil prices have surged some 40percent since the onset of the Iran war as supplies from the Middle East remain disrupted despite increased US measures to try calm markets.

Brazil’s state-controlled oil company, Petrobras, has yet to increase local prices but will be under increasing pressure to do so if the conflict persists. The sugar market is also concerned about Indian output.

“Yet another sugar analyst has cut their expectations for the global sugar surplus for 2025/26 due to lower production expected out of India,” said broker ADMIS in a note.

Consultant and broker Michael McDougall said sugar has an upside bias near-term, adding analysts might, if anything, cut their surplus forecasts for 2025/26 again if Indian output disappoints further. White sugar gained 1.2percent to USD419.50 a metric ton.

COFFEE

Arabica coffee fell 0.9percent to USD2.8925 per lb, heading for losses of 1.4percent this week. Coffee is under pressure from the prospect of a bumper crop in Brazil this year.

Dealers noted, however, that price premiums over futures, also known as differentials, continue to rise in countries like Brazil and Colombia, as farmers resist selling at current market prices. Robusta coffee rose 2.8percent to USD3,524 a ton.

A Vietnam-based dealer said selling in the world’s top robusta producer is very limited as farmers hold out for higher prices.

COCOA

London cocoa rose 1.2percent to 2,432 pounds a ton, having settled down 3.2percent on Thursday. Cocoa is consolidating after having pushed higher after by Ivory Coast’s move to slash government-set farmer prices triggered a pick up in demand for the chocolate ingredient. New York cocoa rose 1.1percent to USD3,351 a ton.