Because of its link to ethanol, sugar keeps tumbling

Because of its link to ethanol, sugar keeps tumbling

Sugar fell to a three- month low Tuesday as tumbling prices for energy eroded the appeal of sugar cane, which is used to make ethanol ”” an alternative to gasoline.

The price of sugar fell 20 percent last year on speculation that global production would outpace demand. Crude oil fell Tuesday to its lowest level in 18 months as mild weather in the eastern United States slashed heating-fuel consumption.

Sugar reached a 24-year high in February on speculation that Brazil, the world’s biggest cane grower, would use more raw sugar to make ethanol.

“As long as crude oil is weak, there is potential for further weakness in sugar,” said Michael McDougall, a broker at Fimat USA. “There is an energy link because sugar is tied to ethanol production.”

Sugar futures for March delivery fell 0.06 cent to 11.10 cents a pound in late trading on the New York Board of Trade. Prices earlier touched 10.83 cents, their lowest level since Oct. 4.

A global sugar surplus may reach 5.1 million tons in the year ending September, according to an estimate by the London-based C. Czarnikow Sugar, the world’s largest sugar broker.

The price declines in New York wiped out gains made earlier on Tuesday that were sparked by news that Indian sugar mills had slowed exports following a price slump.

Less than 25,000 tons of Indian sugar have been sold since the government announced an easing of export restrictions on Dec. 18, the Indian Sugar Mills Association said. The association, based in New Delhi, represents non- state-owned producers.

Indian mills are expected to ship one million tons this year, according to Peter de Klerk, an analyst with C. Czarnikow Sugar. “There aren’t a lot of Indian exports coming to the market,” he said.

Sugar rose to a record $497 a ton in May, before ending the year 3.5 percent lower because of larger-than-normal crops in Brazil and India.

Gold futures for February delivery were little changed, up $5.60 at $615 an ounce on the Comex division of the New York Mercantile Exchange.

Share this post