Sugar Rises Most in Week on U.S. Quota Increase, China Drought

Raw sugar rose the most in a week after the U.S. increased its import quota and on speculation that drought in China will curb production and tighten global supplies.

An additional 200,000 short tons (181,437 metric tons) will be added to the original quota of 1.23 million tons for the year ending Sept. 30, the U.S. Department of Agriculture said on April 23. Drought in Guangxi and Yunnan, China’s top producing regions, reduced output, Liu Xiaonan, an official at the National Development and Reform Commission, said at a conference.

“The rebound this morning might be attributed to the fact that the USDA announced Friday an increase in the import tariff,” Michael McDougall, a senior vice president at Newedge USA in New York, said today in a report. “China will eventually have to increase her imports as will the countries that have let their stocks fall to low levels.”

Raw sugar for July delivery climbed 0.1 cent, or 0.6 percent, to 15.85 cents a pound on ICE Futures U.S. in New York, the biggest gain for a most-active contract since April 19. The price fell 5.6 percent in the previous two sessions.

“China’s sugar market has a deficit, and it is a relatively big deficit in our history,” Liu told the Guangxi Sugar Market Net. China is the world’s largest consumer of the sweetener after India.

Sugar prices more than doubled last year as excess rain in Brazil and a weak monsoon in India curbed output in the world’s biggest sugar-cane growers. The London-based International Sugar Organization forecasts an 8 million-ton production shortfall in the 12 months ending in September.

“From a supply and demand perspective, we are historically in a tight market,” said Jake Wetherall, a trader with Rabobank Ltd. in London. “You are still facing a near-term tightness.”

White sugar for August delivery slipped $1.70, or 0.4 percent, to $480.10 a metric ton on London’s Liffe exchange, the fifth-straight decline.

Yi Tian, M. Shankar
Source: Bloomberg