By Luzi Ann Javier and Debarati Roy June 23, 2014
Hedge funds got more bullish on sugar before prices climbed to the highest since October as dry weather threatened supply from India to Brazil.
Money managers raised their net-long position for the first time in four weeks. A lack of rain in Brazil is compounding damage from the first-quarter drought and will cut yields, says Job Economia & Planejamento, a researcher in Sao Paulo.
Risks of crop damage are rising as an El Nino weather pattern threatens to reduce monsoon rainfall in India, the largest producer after Brazil. Global output will fall short of demand in the year ending Sept. 30, with the gap widening next season, according to Bruno Lima, a senior risk-management consultant at FCStone do Brasil.
“The drought in Brazil will probably have some impact,” Peter Sorrentino, who helps manage $3.8 billion at Huntington Asset Advisors in Cincinnati, said June 19. “We’ll see pretty decent agricultural price movement through the balance of the year, just because of weather-related issues.”
Raw sugar on ICE Futures U.S. in New York climbed 5 percent last week and touched 18.80 cents a pound today, the highest since Oct. 29. The S&P GSCI Agricultural Index rose 0.9 percent. The wider GSCI gauge of 24 commodities advanced 1.3 percent, and the MSCI All-Country World Index of equities added 1 percent. The Bloomberg Treasury Bond Index slipped less than 0.1 percent.