Commodities: Sugar Hits 7-month Low

Sugar Futures Down

After a number of defaults, sugar futures in the U.S. dropped to 7-month lows, as sugar mills in India backed out of deals to import 100,000 tons of sugar from the U.S.

This is the eight loss for sugar in the last ten sessions, making one wonder how low it'll go before it rebounds.

Today the sugar futures sold for below 20 cents a pound, falling to 18.82 a pound at its worst; the lowest sugar futures price since the early part of August 2009.

Sugar Futures Down

European Union Increases Sugar Exports

Sugar Exports

In a move that has angered some of its trading competitors, the European Union decided to export and additional 500,000 metric tons of sugar, which major sugar exporters Brazil, Thailand and Australia have become upset over because of limitations imposed by the World Trade Organization.

The complaint centers around the exportation of subsidized sugar, which was supposed to be limited to 1.37 million tons based on a 2005 WTO decision.

The EU attempts to get around this by saying the exports aren't enjoying any benefits from a subsidy, and so they don't consider it to be subject to the imposed limitations.

This is another way of saying because sugar prices are high the subsidies don't apply. Other exporters will be hurt by the extra sugar on the market which will drive prices down.

Sugar Exports