Raw Sugar’s Best Week Since August Erodes Refining Premium

(Bloomberg) -- Raw sugar headed for its best week since August, sending refining premiums to the lowest in a month and potentially making processing less attractive.

Raw futures are up 2% this week in New York. Prices have been supported by record Brazilian ethanol prices that encourage mills there to turn more cane into biofuel, the Hightower Report said. The move has sent the premium that white sugar commands over raw to the lowest since the start of October.

Lower shipping costs may also be driving refining premiums lower, as that allows refineries to ship in raw sugar more cheaply, said Stephen Geldart, head of analysis at Czarnikow. 

“Dry bulk freight is becoming a lot cheaper, so if you’re a refinery that makes a difference on the costs of your raws going in,” he said.

Raw sugar added 0.3% to 19.69 cents a pound in New York. White sugar was little changed in London, heading for a weekly retreat.

The market is watching to see if prices incentivize shipments out of India. The major producer last week said that it will refrain from subsidizing exports this year as high global prices should help local mills to ship out without any government help.

Elsewhere in the softs market, arabica coffee futures fell 0.5%, while robusta was little changed. Raw sugar edged higher.

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