Sugar Futures Unsweetened as Inventory, Dollar Weigh on Markets

November 18, 2016 9:47AM CST

Sugar futures are prices are not as sweet at the week-end as inventory data shows declines, and stronger U.S. dollar index futures weigh on commodities futures markets.

The March contract in sugar futures was down .20 percent at $20.18 in Friday commodities futures markets trading and headed lower, according to analysts.

World sugar inventories will fall to a five-year low by the end of the 2016-17season, as consumption rises faster than production, according to the U.S. Department of Agriculture. The government agency saw sugar stocks falling by around 7.2 million tonnes in 2016-17 to 30.78m tonnes, compared to a previous forecast of a 5.1 million-tonne drop.

The decline in stocks will be led by sharp falls in India and China, where they are seen the lowest level since 2010-11, according to the US Department of Agriculture.

The USDA saw stocks in India falling to 6.3m tonnes in 2016-17, down from 8.0m a year ago. Gains in Brazil and Europe will offset declines in India and Thailand, according to reports. India's production is forecast to drop 3.6m tonnes to 23.9m due to lower area and yield. Consumption in India, the world's largest consumer, is predicted to rise to a record 27.2m in 2016-17.

In China, the stocks will fall to 2.6m tonnes next year, compared with 3.2m in 2015-16, according to reports. China is the world’s largest importer of sugar, and already is trying to import less; a weaker Chinese currency paves the way for the government to cut imports.

Sugar production in Brazil is forecast up 3.1m tonnes year-on-year to 37.8m on favorable weather and a higher percentage of sugarcane diverted towards sugar production instead of ethanol. Sugar companies in the region crushed 31.75 million tonnes of cane in late October, compared with 32 million tonnes early in the month, according to data released on Wednesday from Unica, a cane industry agency.

In September a major sugar analyst group forecast the sugar deficit in 2016-17 at 6.45m tonnes, while another expected it to hit 7.5m tonnes. Overall, world sugar production in 2016-17 is expected up at 170.9m, compared to 169.3m a year earlier.

Friday’s economic calendar is free of economic data of relevance to the commodities futures markets. Next week is shortened due to the U.S. Thanksgiving holiday. Notable reports include Durable Goods Orders and minutes from the FOMC’s November meeting.

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