Sugar stockpile price fall hits hedge funds, as rally hopes quashed

20th Jul 2015 13:17

(ShareCast News) - Huge world stockpiles of sugar have led to falls in sugar prices that have hit hedge funds in particular and led analysts to warn that prices are unlikely to rebound for a while.On the ICE futures exchange, sugar for October delivery was on Monday trading down 3.2% on the previous week at 11.59 cents per lb.A significant overhang of Thai sugar has been as weighing on near-term prices, the Wall Street Journal reported on Monday, preventing futures reacting to weather pressure on Brazil, the world's largest sugar exporter.Cane industry group Unica is expected to report five days of production were lost to rains in the first half of this month in Brazil's key production region.Although several soft commodities fell last week, hedge funds were caught out by raw sugar's tumble, according to specialist publication AgriMoney, as funds had turned net long for the first time in five months - only for prices to retreat, encouraged by a large delivery of white sugar to specialist merchant ED&F Man on the expiry on Thursday of London's August white sugar contract.On the ICE, sugar was up 8.1% month-on-month, but down 27.5% year-on-year from $16.9 last July.On top of an existing stockpile estimated at 83m tons by the International Sugar Organization, another record crop of cane sugar is on the way for the 2015/2016 season, according to London-based trading house Czarnikow.However, sugar consumption is expected to overtake production for the first time in five years,with Czarnikow predicting a deficit of 1.7m tons in the 2015/2016 season, due to increasing demand in the developing world.But even this won't be enough to make much of an effect on prices, such is the supply of sugar, according to trader Nick Penney at broker Sucden Financial.