ICE sugar soars to two-month high on Brazilian ethanol tax cut
Published: 07/31/2017, 4:38:33 PM
Raw sugar futures rallied to a two-month high on Monday as speculators covered their short positions following a tax change in Brazil that will make ethanol more competitive, according to Reuters.
ICE October raw sugar was up 0.49 cent, or 3.41%, at 14.86 cents per lb by 1331 GMT, after hitting 14.92 cents, its highest since June 1.
The Brazilian government decided on Friday to reduce a federal tax on ethanol by BRL0.0855 per litre, while maintaining the higher diesel and gasoline rates put in place earlier this month.
The move, which should be officially announced as soon as Monday, will make the biofuel more competitive, potentially prompting Brazilian producers to switch more of their output from sugar to ethanol, dealers said.
"Whilst it is expected that the next UNICA report will still show a high sugar mix due to the good weather during July, the ethanol parity is getting higher," said Nick Penney, senior trader at Sucden Financial. "The nearby sugar price advantage is eroding rapidly."
Sentiment was also boosted by a recent cut-back in the bearish stance held by speculators, with exchange data on Friday showing they trimmed their short position by 10,336 contracts.
October white sugar rose US$9.90, or 2.54%, to US$399.70 a tonne.