Analysts anticipate lower sugar prices within the next 6 months (a major decline – 22%). The major reason is higher sugar production in India and Brazil.
The new agricultural year in Brazil started on March 1st 2012. The agricultural authorities expect a 5.4% increase in this year’s sugarcane harvest (up to 602,2M tons). India’s sugar production has exceeded the domestic consumption for the 2nd consecutive year. However, this year the production is expected to decline a little because of dry weather (farmers have to cut sugar acres in favor of more unpretentious crops).
Will sugar prices collapse?
As of April 23rd 2012, sugar prices were declining. The May and June ICE futures contracts depreciated by 0.5% and 1% correspondingly (21,93 cents a pound and 21,55 cents a pound). The FORTS sugar contract closed at 14,4 RUB (-1,373%). A surplus is the major reason for the price decline. The global consumption of sugar is growing.
The August futures contract offered by the London Commodity Exchange was around $574,9 per ton on April 23rd (or -$7.7 as compared with the price seen a day before). According to the USDA, the global production of sugar in 2012 is expected to increase by 2.1% up to 168.2 million tons.
Mexico. Is the world’s 6 largest sugar producer. This year it is expected to produce 1.2% less sugar (5.04 million tons).
The Persian Gulf countries. They are planning to increase the import of sugar from India instead of Brazil. The major reason is cheaper transportation costs.
China imported 94 164 tons of white sugar in February 2012. According to the Chinese department of agriculture, the import of sugar is expected to increase by 600% up to 500.000 tons this year.
Sugar market prospects
In general, the current situation looks complicated. That is why it is rather difficult to predict the direction of the future trend. For now, the price is close to the lows of June 2011. It is not clear whether sugar price will keep declining or some negative factors push them up. Therefore, we should wait for some major news to clarify the situation.
The European market of sugar is seeing a deficit, which leads to higher prices. Local duty-free sales help to avoid inflation consequences.
According to the Commodity Trading Department of , This year the US has set the sugarcane quotas at 1231497 tons. That is why the sugar is bought at wholesale prices - $0.53 – 0.55 a pound, which is much higher than the futures prices at ICE (21.54 cents a pound).
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What is your sugar market outlook?
