Global sugar supplies are tightening as mills wind down the cane crush in the cent re-south of Brazil, forcing buyers in the world market to pay shrinking discounts to futures.
European traders this week quoted Brazilian raw sugar for December shipment at 61-63 points (0.61-0.63 U.S. cents) below ICE March futures, and quoted discounts against January shipment at just 20 points, signaling a tightening of supplies in the first quarter of 2016, Brazil’s inter-crop period.
This compares with a discount in late October of up to 85 points to ICE March raw sugar futures, for November shipment.
Heavy rainfall in the second half of November had cut production and sugar content, contributing to the smaller discount to futures, traders said.
Mills, now wrapping up the crush in cent re-south Brazil, are prioritizing allocation of cane to ethanol biofuel, rather than to sugar.
Sugar content in cane subsides when the cane is wet through.
“The supply of sugar is tightening up,” said Michael Liddiard of consultancy Agrilion, who estimated that some 500,000-700,000 tonnes of cane remained to be crushed in the centre-south.
He also saw risks of tight ethanol supplies in Brazil during the inter-crop period.
“The bigger questions now are when can/will the 2016/2017 (centre-south) harvest begin and will stocks of sugar and especially ethanol last until then?”
The inter-crop period in centre-south Brazil typically runs from January to April.
Many mills will be looking to wind down crush operations this month after the delays caused by rains, traders said.
They noted market talk that some Brazilian producers had bought back raw sugar that was sold to trade houses for export, due to buoyant domestic demand for low quality white sugar and for anhydrous ethanol in Brazil.
One European trade source cited reports that spot raw sugar deals had met specific needs, as some producers were in a rush to fulfill contracts.
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