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Adam Sarhan WSJ Quote: Sugar Futures Hit Multiyear Low on Glut



Dec. 17, 2013 7:02 p.m. ET
NEW YORK—Raw-sugar futures tumbled to their lowest level in 3½ years after the market broke through this year’s low of 16 cents a pound.
Investors liquidated bets that prices would rise and added to a growing short position as fresh supplies flowed from top-growing and exporting countries, including Brazil and Thailand, traders said.
Mills in Brazil’s center-south, where 90% of the country’s sugar cane is grown, crushed 570 million tons of cane in the current season through Dec. 1, an increase of 11.6% from the previous year, the Brazilian Sugarcane Industry Association, or Unica, said last week. Brazil is the world’s largest sugar producer and exporter.
Brazilian sugar production has increased 0.7% during that period from a year earlier, to 33.1 million tons.
Thailand, the world’s No. 2 sugar exporter, also started its harvest late last month. The Foreign Agricultural Service, a branch of the U.S. Department of Agriculture, expects Thailand’s sugar output to reach almost 11 million metric tons this season, up 9% from the previous harvest, adding to a global glut.
Global sugar supplies are expected to exceed demand by 4.7 million metric tons in the current crop year that began Oct. 1, according to the London-based International Sugar Organization.
Raw sugar for delivery in March on the ICE Futures U.S. exchange ended at 15.96 cents a pound, down 1.9% on Tuesday, at the lowest settlement since June 29, 2010.
“What we’re seeing now is a definitive break of all near-, medium- and long-term support for sugar,” said Adam Sarhan, chief executive at Sarhan Capital, a New York-based investment firm. “It’s a tremendous glut of supply and just a lack of demand in general.”
Prices have been grinding lower all year, though they spiked to a one-year high in October as traders worried about a near-term supply shortage. A fire at a Brazilian sugar-exporting terminal on Oct. 18 was the pinnacle of the rally, sending the market soaring above 20 cents a pound.
But since then, futures have fallen during 32 out of 40 sessions as those fears proved unfounded.
The sugar market “still needs to go lower to discourage production,” said James Cordier, president of Liberty Trading Group, a Tampa, Fla.-based brokerage. End users of sugar “are just buying hand to mouth, as little as they can.”
Mr. Cordier expects sugar prices to fall to 14 cents a pound “before this rout is over.”