4 years ago the WTO restrained the EU’s sugar exports, thus causing overproduction of sugar in Europe. Sugar prices reached critical (low) levels, thus reducing the production (as it was not profitable).
Spring frosts in 2010 seriously affected the production volume in 2011. In a statement made by a Nestle representative on August 13th it is said that the sugar reform in Europe was based on the supposition that global sugar prices will remain lower than European prices. However the result is the opposite.
In order to satisfy the demand and to stabilize the European market of sugar, in 2012 the EU is planning to expand the sown area for sugar beet by 4% (up to 3 890 hectares).
Moreover, this summer the weather conditions favored the crops of sugar beet. This is going to be the most substantial harvest over the last 6 years. France, the EU’s biggest producer of sugar, is going to harvest 15.4 tons per hectare. The UK’s harvest is expected grow by 20% as compared to 2010.
Let’s make conclusions. According to the Department of Commodity Trading , , sugar prices will probably be declining due to the harvesting season in the northern hemisphere. At the same time, the market looks suspiciously calm. Technically, the price is moving within a 2-week range, with a narrow range being formed above the MA 50, which may hint at a forthcoming explosive rally. A speculative rally before a decline is fairly logical.
