Sugar may extend rally on shortages
Sunday, 16 August 2009
NEW DELHI, Aug. 15 (Bloomberg): Sugar, which has almost doubled this year, may climb further as buyers led by India seek more supplies to meet a shortfall, an official at Al Khaleej Sugar Co., the world's biggest refinery, said.
"You have pent-up demand in many countries," Cyrus Raja, general manager at Dubai-based Al Khaleej said in a phone interview yesterday. "It's not just India. Other countries are also facing shortages," he said.
Sugar advanced to a 28-year high Aug. 12 on speculation adverse weather will cut output and prolong a deficit. A below- average monsoon may curb yields in India, the top consumer.
Four times more rain than normal has delayed the harvest in Brazil, the biggest producer. Global demand will exceed output by as much as 5 million metric tons in the year through September 2010, according to the International Sugar Organization. "The market has more potential for upside than downside," Raja said.
The sweetener is the third-best performing commodity on the UBS Bloomberg CMCI Index this year. Sugar for October delivery on ICE Futures US in New York declined 3.3 per cent to 22.21 cents a pound yesterday. The most-active contract is still up 19 per cent for the month and 88 per cent in 2009. The commodity reached a record 66 cents in November 1974.
The number of 40-cent call options for March 2010 has quintupled to 19,940 contracts in the past four months. A call contract gives the holder the right, but not the obligation, to purchase a commodity at a given price by a specific date.
"Sugar is certainly going to go much, much higher during the course of the bull market," Jim Rogers, chairman of Rogers Holdings, said in an Aug. 6 interview in Singapore.
Food companies including General Mills Inc., Kraft Foods Inc. and ConAgra Foods Inc. asked the US government earlier this month to increase sugar-import quotas after inventories fell to a 34-year low and prices surged.
Mexico, normally the biggest exporter to the US, may import 393,000 tons through to December after the industry forecast an 11 per cent drop in the harvest to 4.9 million tons. Pakistan, Asia's third largest sugar user, plans to import 375,000 tons to cool local prices.
"You've Iran running down its stockpiles, and even Iraq is buying," Raja said. "Sudan, which normally doesn't buy white, is now looking to buy refined sugar."
Al Khaleej has sold 100,000 tonnes of sugar to Iraq and may sell more to buyers in the Middle East and Far East, he said. The refiner has sold 20,000 tons of white sugar to India and was in talks to sell more, he said.
India's raw-sugar imports in the year starting Oct. 1 may reach 5 million tonnes, Paris-based researcher Sucres & Denrees Group said July 28.
"There's a lot of buying interests, but not many deals are getting concluded because of the price," Raja said. "We are running our refinery at its full capacity for the past two months to meet the demand."
Al Khaleej may produce around 1.5 million tonnes of sugar this year, the same as last year, he said. Al Khaleej's refinery has the capacity to process 5,000 tonnes of raw sugar a day, he said. The plant is the largest standalone sugar refinery in the world, according to the company's Web site.
"You have pent-up demand in many countries," Cyrus Raja, general manager at Dubai-based Al Khaleej said in a phone interview yesterday. "It's not just India. Other countries are also facing shortages," he said.
Sugar advanced to a 28-year high Aug. 12 on speculation adverse weather will cut output and prolong a deficit. A below- average monsoon may curb yields in India, the top consumer.
Four times more rain than normal has delayed the harvest in Brazil, the biggest producer. Global demand will exceed output by as much as 5 million metric tons in the year through September 2010, according to the International Sugar Organization. "The market has more potential for upside than downside," Raja said.
The sweetener is the third-best performing commodity on the UBS Bloomberg CMCI Index this year. Sugar for October delivery on ICE Futures US in New York declined 3.3 per cent to 22.21 cents a pound yesterday. The most-active contract is still up 19 per cent for the month and 88 per cent in 2009. The commodity reached a record 66 cents in November 1974.
The number of 40-cent call options for March 2010 has quintupled to 19,940 contracts in the past four months. A call contract gives the holder the right, but not the obligation, to purchase a commodity at a given price by a specific date.
"Sugar is certainly going to go much, much higher during the course of the bull market," Jim Rogers, chairman of Rogers Holdings, said in an Aug. 6 interview in Singapore.
Food companies including General Mills Inc., Kraft Foods Inc. and ConAgra Foods Inc. asked the US government earlier this month to increase sugar-import quotas after inventories fell to a 34-year low and prices surged.
Mexico, normally the biggest exporter to the US, may import 393,000 tons through to December after the industry forecast an 11 per cent drop in the harvest to 4.9 million tons. Pakistan, Asia's third largest sugar user, plans to import 375,000 tons to cool local prices.
"You've Iran running down its stockpiles, and even Iraq is buying," Raja said. "Sudan, which normally doesn't buy white, is now looking to buy refined sugar."
Al Khaleej has sold 100,000 tonnes of sugar to Iraq and may sell more to buyers in the Middle East and Far East, he said. The refiner has sold 20,000 tons of white sugar to India and was in talks to sell more, he said.
India's raw-sugar imports in the year starting Oct. 1 may reach 5 million tonnes, Paris-based researcher Sucres & Denrees Group said July 28.
"There's a lot of buying interests, but not many deals are getting concluded because of the price," Raja said. "We are running our refinery at its full capacity for the past two months to meet the demand."
Al Khaleej may produce around 1.5 million tonnes of sugar this year, the same as last year, he said. Al Khaleej's refinery has the capacity to process 5,000 tonnes of raw sugar a day, he said. The plant is the largest standalone sugar refinery in the world, according to the company's Web site.