Sugar slump may end on restocking, ethanol demand
Sunday, 23 May 2010
NEW YORK, May 22 (Bloomberg): The slump may be ending for sugar, this year's worst-performing commodity, as importers replenish stockpiles and as demand increases for ethanol made from cane.
Raw sugar may trade as high as 20 cents a pound in New York by October, up 33 per cent from yesterday's close at 14.99 cents on ICE Futures US, said Peter Baron, the executive director of the International Sugar Organization. Newedge USA, a commodity broker, expects a rally to 17 cents in the next three months.
Prices plunged as much as 57 per cent from a 29-year high of 30.4 cents on Feb. 1 as importers slowed purchases and rising output from Brazil and India, the largest growers, was forecast to erase a global production deficit next year. Dwindling inventories and lower prices may revive purchases.
"There will be restocking by some countries-maybe not to the extent as before, but surely they need some sugar," said Baron, a former German agriculture official who has run the London-based ISO since 1994. "Just like the steep rise was not warranted, the fall has also been exaggerated."
Raw sugar for July delivery rose 0.66 cent, or 4.4 per cent, to 15.65 cents today on ICE Futures US in New York, capping an 11 per cent gain for the week that was the biggest since Oct. 16.
Sugar futures more than doubled last year as a dry spell hurt cane production in India and too much rain damaged crops in Brazil. The sweetener slumped 44 per cent this year, more than double the decline of any other commodity tracked by the Reuters/Jefferies CRB Index except natural gas, down 26 per cent.
Inventories in India, the largest sugar consumer, are equal to about two and a half months of consumption, said Baron, 69. He added that the country normally held six months of supply. In the US, the stocks-to-use ratio is 7.9 per cent, the lowest level in 53 years, government data show.
Sugar isn't likely to trade below the "watermark" of 13 cents in the next three to five years, even as volatility increases, Fred Zeller, the managing director of sugar-beet growers group SZVG, said in an interview in New York. Sugar reached 13 cents on May 7, the lowest level since April 2009.
India's sugar production will be "slightly" more than an earlier estimate of 18.5 million tons in the year ending Sept. 30, and next year, it will top domestic consumption of 23 million tons, according to government estimates.
Raw sugar may trade as high as 20 cents a pound in New York by October, up 33 per cent from yesterday's close at 14.99 cents on ICE Futures US, said Peter Baron, the executive director of the International Sugar Organization. Newedge USA, a commodity broker, expects a rally to 17 cents in the next three months.
Prices plunged as much as 57 per cent from a 29-year high of 30.4 cents on Feb. 1 as importers slowed purchases and rising output from Brazil and India, the largest growers, was forecast to erase a global production deficit next year. Dwindling inventories and lower prices may revive purchases.
"There will be restocking by some countries-maybe not to the extent as before, but surely they need some sugar," said Baron, a former German agriculture official who has run the London-based ISO since 1994. "Just like the steep rise was not warranted, the fall has also been exaggerated."
Raw sugar for July delivery rose 0.66 cent, or 4.4 per cent, to 15.65 cents today on ICE Futures US in New York, capping an 11 per cent gain for the week that was the biggest since Oct. 16.
Sugar futures more than doubled last year as a dry spell hurt cane production in India and too much rain damaged crops in Brazil. The sweetener slumped 44 per cent this year, more than double the decline of any other commodity tracked by the Reuters/Jefferies CRB Index except natural gas, down 26 per cent.
Inventories in India, the largest sugar consumer, are equal to about two and a half months of consumption, said Baron, 69. He added that the country normally held six months of supply. In the US, the stocks-to-use ratio is 7.9 per cent, the lowest level in 53 years, government data show.
Sugar isn't likely to trade below the "watermark" of 13 cents in the next three to five years, even as volatility increases, Fred Zeller, the managing director of sugar-beet growers group SZVG, said in an interview in New York. Sugar reached 13 cents on May 7, the lowest level since April 2009.
India's sugar production will be "slightly" more than an earlier estimate of 18.5 million tons in the year ending Sept. 30, and next year, it will top domestic consumption of 23 million tons, according to government estimates.