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Brazil mills expect sugar hedging windows ahead -market experts
November 6, 2017 / 4:37 PM / a month ago

Brazil mills expect sugar hedging windows ahead -market experts

SAO PAULO, Nov 6 (Reuters) - Brazilian sugar mills will have opportunities in coming weeks to sell sugar at higher prices on New York’s ICE exchange and reduce the hedging delay they have been carrying on their books, sugar market experts said on Monday.

The outlook for the sugar market until at least the end of the first quarter next year is for sustainable values, with potential for spikes at moments, the experts said.

Sugar prices in New York have been hovering around 14 cents per pound for several months, a value considered low by Brazilian producers, after a collapse late last year from five-year highs around 23 cents per pound.

The situation kept mills from hedging their exportable sugar in New York. Archer Consulting estimated that as of the end of September, only 15 percent of Brazil’s center-south exportable sugar volume was hedged, the lowest level since the 2015/16 crop.

“I believe we will see hedging windows in the next weeks, with prices going above 15 cents in certain moments,” Alexandre Figliolino, a sugar and ethanol consultant at MBAgro, told Reuters in the sidelines of a sugar seminar in Sao Paulo.

Figliolino expects some tightness in the global sugar market in coming months. He said price fixation will be spurred by the Brazilian currency having lost value against the dollar in the last month, which allows mills to receive more reais on their sugar exports.

Paulo Roberto de Souza, Chief Executive Officer of Copersucar, the world’s largest sugar cooperative, has a positive outlook for the market until at least April next year, when center-south mills start crushing the new crop and European and Indian supplies hit the market with larger volumes.

“Brazilian mills should take advantage of spikes in prices in the coming weeks, since many of them have sold little,” the CEO said.

Archer Consulting’s Arnaldo Correa said that an example of that delayed hedging happened last week when funds sharply reduced their sold position and prices did not move much, since mills took the opportunity to sell.

Figliolino believes prices could go up gradually once most of that overdue fixation is reduced. He also sees a trend for more ethanol production next year, as a result of larger local demand and better prices for the biofuel, that would take 2 to 3 million tonnes of sugar out of the market next season. (Reporting by Marcelo Teixeira; editing by Grant McCool)

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