'Significant' sugar buying likely after price drop
Sunday, 21 March 2010
NEW DELHI, March 19 (Bloomberg): "Significant" sugar purchasing by importers was likely over the next few months after prices fell, the Commonwealth Bank of Australia said in a report today.
"Key buyers to watch include Pakistan, Egypt, Indonesia, India and the US," the bank's agricultural commodities strategist Luke Mathews wrote in the e-mailed report. Wide-scale purchases could significantly restore market support, he said.
Raw sugar has slumped 37 per cent from a 29-year high of 30.4 cents reached on Feb. 1 amid bets that global production will rebound after rain and drought cut output in Brazil and India last year. Prices may post a modest bounce in the near- term and could rise sharply if there were any problems with the South American harvest, according to Commonwealth Bank.
"In our opinion, the market is very susceptible to a sharp upward correction," Mathews wrote.
May-delivery raw sugar added 3.8 per cent to 19.03 cents a pound in New York yesterday. The price fell to 17.66 cents in intraday trading on March 17, the lowest level for a most-active contract since July 21.
Prices would rise to more than 20 cents "with a possible eye toward the mid-20s," Commonwealth Bank said.
Sugar production in Australia, the third-largest exporter, may increase by as much as 10 per cent this season if favorable weather continued, the report said, without giving a tonnage estimate. Crops could be damaged by a cyclone forecast to cross the coast of Queensland state, the report said.
Cyclone Ului, downgraded today to a category 2 storm, was expected to make landfall on March 21 between Cardwell and Mackay, according to the Bureau of Meteorology. The cyclone was 950 kilometers (590 miles) east northeast of Mackay at 10 a.m. local time, the bureau said on its Web site.
"Despite the downgrade it is a storm system that does bear extremely close monitoring," Mathews said by phone from Sydney. "The cane crop up there is very well advanced and still susceptible to flattening with the winds and high rain that even a category two storm could provide," he said.
The bank hadn't assessed possible damage because of lack of clarity over the storm's path and effect if it crossed the coast, he said. Cane is harvested from around June to late November in Australia, the largest shipper after Brazil and Thailand.
Ian Ballantyne, the chief executive officer of Australian group Canegrowers, said yesterday domestic production could rise by 5 per cent to 7 per cent. The group in December forecast a 5 per cent gain in output from last year's production of about 4.3 million metric tons.
"All in all, the run-up to this year has been extremely good and the only blip on the horizon is this cyclone, that is off there right now," he said. "It has the potential to do damage if it cuts the coast at the wrong place and intensifies above its current level," he said yesterday from Brisbane.
"Key buyers to watch include Pakistan, Egypt, Indonesia, India and the US," the bank's agricultural commodities strategist Luke Mathews wrote in the e-mailed report. Wide-scale purchases could significantly restore market support, he said.
Raw sugar has slumped 37 per cent from a 29-year high of 30.4 cents reached on Feb. 1 amid bets that global production will rebound after rain and drought cut output in Brazil and India last year. Prices may post a modest bounce in the near- term and could rise sharply if there were any problems with the South American harvest, according to Commonwealth Bank.
"In our opinion, the market is very susceptible to a sharp upward correction," Mathews wrote.
May-delivery raw sugar added 3.8 per cent to 19.03 cents a pound in New York yesterday. The price fell to 17.66 cents in intraday trading on March 17, the lowest level for a most-active contract since July 21.
Prices would rise to more than 20 cents "with a possible eye toward the mid-20s," Commonwealth Bank said.
Sugar production in Australia, the third-largest exporter, may increase by as much as 10 per cent this season if favorable weather continued, the report said, without giving a tonnage estimate. Crops could be damaged by a cyclone forecast to cross the coast of Queensland state, the report said.
Cyclone Ului, downgraded today to a category 2 storm, was expected to make landfall on March 21 between Cardwell and Mackay, according to the Bureau of Meteorology. The cyclone was 950 kilometers (590 miles) east northeast of Mackay at 10 a.m. local time, the bureau said on its Web site.
"Despite the downgrade it is a storm system that does bear extremely close monitoring," Mathews said by phone from Sydney. "The cane crop up there is very well advanced and still susceptible to flattening with the winds and high rain that even a category two storm could provide," he said.
The bank hadn't assessed possible damage because of lack of clarity over the storm's path and effect if it crossed the coast, he said. Cane is harvested from around June to late November in Australia, the largest shipper after Brazil and Thailand.
Ian Ballantyne, the chief executive officer of Australian group Canegrowers, said yesterday domestic production could rise by 5 per cent to 7 per cent. The group in December forecast a 5 per cent gain in output from last year's production of about 4.3 million metric tons.
"All in all, the run-up to this year has been extremely good and the only blip on the horizon is this cyclone, that is off there right now," he said. "It has the potential to do damage if it cuts the coast at the wrong place and intensifies above its current level," he said yesterday from Brisbane.