Stock exchange news. June rise of sugar price was mostly connected with the general lowering of Brazilian crop estimation. Only 217 mln. tons of sugar cane was harvested from the start of harvest till mid-July, which is by 15% less than last year (255 mln.). Besides, sucrose yield average per one ton of sugar cane has lowered from 129.88 (last year) to 125.71 kg per ton. Consequently, if last year 14 mln. tons of sugar was received during this period last year, then this year it is only 12. Then the forecast of sugar production was generally lowered from 34.28 mln. tons to 32.28 mln. tons.
During the summer period the share of Brazil in the global export amounts to 70%, which actually explains the price behaviour. It is worth admitting that demand during the summer period is based on Asian region, in which China plays a significant role. During the last 3 seasons there could be observed a progressive deficit of sugar stocks in China, which influences the product price at domestic market. There is an opinion that sugar import in China will reach the record mark of 3 mln. tons during the season of 2011/2012. Actually, these rumours have already served as one of the factors for the speculative rise of sugar price since mid-August. Crop problems also concern Argentina, which is included in the 10th of largest producers; its production loss will amount to 400 ths. tons.
The following speaks in favour of the bullish trend development at sugar market: a number of European countries can gather a record crop of sugar beet, but the exact figure is not yet announced by the European Union. The weather conditions in India are favourable for the production growth, and the production volume of 26 mln. tons (24.6 mln. tons during the last season) is expected before the crop starts in November. Besides, it is forecast that Indian export will amount to 3 mln. tons.
There are more factors that influence the prices but are not connected with the production cycle:
1) High level of expenditures, which are connected with land and labour cost, as well as investment interest to the market of raw materials amid global economic instability.
2) The last thesis is proved by the fact that since the beginning of July commodity funds have mutually accumulated 1.456 bln. dollars. One way or another, after all reconsiderations the world surplus is estimated as 7-8 mln. tons due to the record production in Asia and Europe.
What such high volatility of sugar market during the last 2 weeks based on? The analytics of Department of Derivatives Trading explain this by the point that rumours about increasing Chinese import served as a key factor. A number of large Asian importers have also made use of the situation, having created additional panic at the market. There is a current investigation concerning the last fact.
Technically, the market will most likely continue its sideways range in the range of 26-32:
