Sugar surplus to keep prices under pressure

JAKARTA: A global sugar surplus will keep prices under pressure for the foreseeable future, although the commodity is unlikely to trade below 15 US cents per pound, an official from the International Sugar Organization (ISO) said.
Benchmark New York futures SBc1 plunged to a three-year low of 15.93 cents a pound in July on the prospect of a bumper crop in Brazil. Even though forecasters have since trimmed their predictions for the world’s top producer, it is still expected to rack up record output, and prices last stood at $16.47.
“There is bearish pressure on prices, at least until we see how this 13/14 season goes on. (But) personally, I don’t think prices will go below 15 cents,” ISO Executive Director Peter Baron said on the sidelines of an industry conference.
Other sources at the event on the Indonesian island of Bali said that low prices could prompt key producers to cut output or curb sales, slightly easing the downward price-momentum.
Patches of demand will also help rein in price losses.
Indonesia’s raw sugar imports could more than double to 5.4 million tons in 2013 from 2.5 million tons last year after heavy rains hit domestic output and due to rising consumption and population growth.
“Total imports could reach 5.4 million tons as there is a weather anomaly and there’s no increase in plantation areas,” Achmad Widjaja, secretary general of the Indonesian Sugar Association, said at the event.
And on the supply-side, Brazil’s leading forecaster Datagro is expected to lower its 2013/14 cane crush forecast for the key center-south region as well as estimates for Brazil’s sugar crop due to a July frost.
A senior industry official said a sluggish global market could encourage Brazilian growers to produce more ethanol.
“Sugar prices need to go up for Brazilians to sell sugar, otherwise Brazilians are going to sell only ethanol,” he said.
The ISO said last week it expected the sugar surplus to slide to 4.5 million tons in 2013/2014 from 10.3 million tons in 2012/2013. World sugar output is predicted to fall by 2.1 million tons year-on-year to 180.8 million tons in the season from October 2013 to September 2014, the group said in its latest quarterly report.