The global market of sugar has been unstable so far. The prices have been volatile. According to the experts of , the price of the sugar futures contract may well lose 20% more.
This year the price on sugar has already declined by 29% as compared to 2010 mostly due to higher supply and lower demand. In the 2011/12 marketing year the global supply of sugar is expected to outpace the demand by 4.5 million tons. Some countries of the northern hemisphere are expected to boost their sugar import.
What level the prices will reach amid overproduction? Should investors be afraid of a market collapse?
Now let’s compare sugar prices in different countries around the world:
Take a look at the following chart, courtesy of :
As we can see, it is European countries that show the highest sugar prices due to high consumption and low production. The more a country depends on the export of a certain product, the higher price it is ready to pay for it.
Latest changes in the global market of sugar
According to the Department of Portfolio Investments of , sugar prices were declining since early October until late November. They seem to have stabilized by now. Almost all the food futures have been declining in value. As for sugar futures, the price has recently reached 28,73 cents per pound or $633 per ton.
The European market of sugar is rallying. London Commodity Exchange is selling sugar at 763,6 per ton, which is $7,4 higher than the price seen before the October contract. Now LCE has started offering the December futures contract at $ 702,1 per ton, which is a significant decline. NYSE is also showing lower sugar prices: the current price is $576 per ton (-2.2% as compared to the previous contract).
Sugar market prospects:
Sugar prices around the world depend on the futures prices offered by the world’s major exchanges (SP500, RTS etc.)
According to the Department of Commodity Trading of , the sugar futures contracts have reached the 5-month low on fears of unstable supplies form flood-ridden Thailand.
Jonathan Kingsman, the famous analyst, anticipates a downtrend in the global market of sugar for the next 12 months due to oversupply (7-8 million tons).
The analytic team of the “Australia & New Zealand” bank expects the global production of sugarcane to reach 28.2M tons in the 2011/12 marketing year, as compared to the current value of 27.4M tons. The global production of sugar is expected to reach 3.8M tons, while the global export will be equal to 2.6M tons (or +100K tons).
Here is the chart representing the sales of March futures and showing a distinct bearish trend in the market of sugar:
India’s production leadership. conducted a survey and found out that India is the world’s number 1 in terms of sugarcane production, if not to consider Brazil as its production has been unstable so far. Over the recent years India has been gathering abundant harvests of sugarcane. Moreover, in 2012 India is expected to break the record 355M tons.
Sources of possible growth. After 3 years of deficit, this year won’t be able to give an opportunity to replenish reserves. Brazil, Australia and South Africa’s export oriented economies will leave the production level the same or may even reduce it. Next year it is the EU, Russia and Thailand that can produce extra 8M tons of sugar.
Weather risks. Weather is a major factor influencing the global market of sugar.
China’s role. China is the world’s biggest consumer of sugar. This and next year China is expected to import 2.45M tons of sugar.
Export leaders. In 2012-2013 Brazil is not planning to expand its production of sugar. The following chart represents the overall export picture:
Market Leader and would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
Will sugar prices around the world keep growing?
