(Bloomberg) -- A key spread between the two most-active raw sugar futures contracts widened this week as an expected slowdown in exports from the world’s top supplier Brazil is seen keeping markets tight in the short term.
The most-active March contract fell as much as 2.2% Friday, trading 1.61 cents above the May contract. The spread between both contracts is near the highest in a year.
Tightness in the raw sugar markets will be felt the most between December and January, as little volumes from Brazil are expected to hit export markets during those months, said Claudiu Covrig, lead analyst at Covrig Analytics. That’s set to be a crucial period because another major shipper, Thailand, will still be in the early days of its harvest, he added.
The March-May spread “spiked to new highs incentivizing Thai producers to maximize their output for the first quarter of 2025,” Covrig said.
A severe drought reduced sugar cane yields in Brazil, boosting fears that the harvest will end earlier than usual this year. That’s the opposite scenario from what the market saw last season, when abundant rains allowed Brazilian mills to keep supplying markets through year-end.
The concerns surrounding raw sugar contrast with weaker price moves in the refined sugar variety. White sugar’s premium to raw is near the narrowest in almost three years following an outlook for higher production and stockpiles in Europe.
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