Skip to main content

The Journal Gazette

September 23, 2016 1:10 PM

Column: Sugar rushes higher on global shortfall

WALT and ALEX BREITINGER | Breitinger & Sons LLC

Sugar prices exploded this week, pushing to more than 23 cents per pound, the highest level in more than four years. Prices have more than doubled during the last year as a global sugar shortfall looms after two years of disappointing harvests.

Sugar is produced around the world, extracted from sugarcane in tropical climates and sugar beets in higher latitudes, but almost half of all sugar production comes from just three countries -- Brazil, India and Thailand. All three countries’ sugarcane crops were hurt by the recent El Niño cycle, which stripped them of much-needed rains.

As a result, global supply will likely fall short of demand again this year, which has led to rampant buying from end users and investors alike. As of midday Friday, raw sugar for delivery in October traded for 22 cents per pound in New York.

Copper climbs

Copper prices shined on a one-month high on Friday, nearing $2.20 per pound.

Prices had been languishing near $2 a pound for the last year, causing global miners to scale back production.

Global demand, especially from the top-consumer China, has been tepid, but the cutback in production has led to a global supply deficit. If China’s growth returns to its former levels, some analysts expect the global copper deficit could turn to a shortage by 2018, which might take prices back toward the 2011 high of more than $4.50 per pound.

Copper is an excellent conductor of electricity and heat, making it widely used in the manufacturing and construction sectors. Unfortunately for builders, as copper’s cost is rising, so, too, is lumber, which is near the highest price since 2015.

Cattle lunge lower

After showing signs of life recently, the cattle market turned sharply lower at the end of the week, plunging on Friday.

The drop came as U.S. beef prices fell to a three-year low, according to data from the U.S. Department of Agriculture. Weak consumer demand for beef and overwhelming supplies of cattle are causing meatpackers to lower the price they’ll pay cattle producers, driving the futures market lower.

The market was especially active Friday as ranchers, meatpackers, and traders positioned themselves ahead of the USDA’s monthly Cattle on Feed Report, which was released after the market closed.

Walt and Alex Breitinger are commodity futures brokers in Valparaiso. They can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.