Sugar exchange traded notes climbed Friday, with sugar futures surging to a four-year high, on speculation of smaller harvest across major producing regions.
On Friday, the iPath Bloomberg Sugar Subindex Total Return ETN (NYSEArca: SGG) rose 6.3% and Teucrium Sugar Fund (NYSEArca: CANE) gained 5.1%. Sugar has staged a huge comeback in 2016, with SGG up 36.1% and CANE up 34.4% year-to-date.
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Meanwhile, ICE sugar futures increased 6.2% to $2.247 per pound.
Sugar prices jumped Friday after Brazil revealed a slowdown in production and Robobank projected a rising global deficit in the upcoming season.
[related_stories]Brazil’s main center-south sugarcane region produced 2.54 million metric tons of sugar in the second half of August, or 14% slower than from the first half of last month, fueling speculation that there would be a weak finish to the harvest, reports Nigel Hunt for Reuters.
“The trade has been spooked by more modest Brazilian production so they are wary about being short,” analyst Tobin Gorey of Commonwealth Bank of Australia told Reuters.
Robobank projected that there would be a global deficit of 7.2 million metric tons in the upcoming 2016/17 season after a 7.9 metric ton shortfall in the current season.
“The fundamentals that drove the rise in prices earlier this year have remained largely unchanged. Indeed, little has actually changed in the last quarter,” Robobank said, according to the Financial Times.
Robobank attributed to the deficit to smaller-than-expected harvest from major producers across the globe.
“Naturally, the factors that are arguably the biggest influences on the fundamental picture for global sugar—namely the size of the Indian, Thai and Centre/South Brazilian crops—are all still the subject of intense monitoring and debate,” Robobank’s global sugar strategist Andy Duff said. “But the uncertainties about each of them are all still months away from being resolved.”
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iPath Bloomberg Sugar Subindex Total Return ETN