Tags: sugar | commodities | agriculture | food

Sugar Seen Needing Deeper Shortages to Ensure Recovery in Prices

Wednesday, 27 August 2014 06:43 AM

Global sugar consumption needs to outstrip supply by at least 3 million metric tons to 4 million tons before prices recover significantly, according to the International Sugar Organization.

The world market will have a surplus of 1.3 million tons in the 12 months starting October, a fifth year of glut, and a small deficit in the following year, said Lindsay Jolly, the senior economist. The oversupply will be about 4 million tons this season, he said in an interview in Indonesia yesterday.

Futures have plunged more than 50 percent in New York from a three-decade high in 2011 as global harvests outpaced demand, boosting stockpiles that will reach a record 45.5 million tons at the end of September, according to the U.S. Department of Agriculture. Any potential price recovery because of output declines next season may be muted by huge stockpiles, the London-based ISO said in a report Tuesday.

“Even with a deficit it won’t really mean much until you do get that statistical deficit translating into a physical deficit,” Jolly said at a conference in Yogyakarta. “I think you are going to need at least a 3 to 4 million ton deficit” for prices to move significantly, he said.

The contract for delivery in October rose 2.3 percent to settle at 15.71 cents a pound on ICE Futures U.S. in New York on Tuesday. Prices reached 36.08 cents in February 2011. Raw sugar reach 22 cents in 12 months as prices under 17 cents encourage buyers to build inventories, according to UBS AG.

Price Recovery

To expand the deficit and ensure a recovery in prices, supply declines will be needed from top exporters Brazil, Thailand and Australia, Jolly said. A stronger Brazilian real and higher gasoline prices in the world’s second-biggest ethanol producer may help spur shortages, he said.

Demand may increase among importers such as Indonesia, which is set to be the world’s biggest buyer, Jolly said. The country may buy 500,000 tons more raw sugar next year, up from 2.8 million tons this year, he said. The Indonesian Sugar Refiners Association estimates imports by processors may reach 3.6 million tons in 2015, up 29 percent from this year.

World output will probably advance 0.6 percent to 183.8 million tons in 2014-2015 and consumption may rise 2.1 percent to 182.4 million tons, the ISO said yesterday. Import demand will probably fall 1.8 percent to 56.6 million tons, it said.

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Global sugar consumption needs to outstrip supply by at least 3 million metric tons to 4 million tons before prices recover significantly, according to the International Sugar Organization.
sugar, commodities, agriculture, food
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2014-43-27
Wednesday, 27 August 2014 06:43 AM
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