Sugar Prices Seen Staying High as China, Indonesia Replenish Inventories
World sugar prices may range between 23 cents and 28 cents a pound as China, the second-biggest user, and Indonesia increase imports, draining a global surplus of 4 million metric tons, the International Sugar Organization said.
The market may have a “a technical blip” to 30 cents, Executive Director Peter Baron said in an interview in the Philippines. The raw variety averaged 12.78 cents in New York over the past 10 years and ended at 27.84 cents on Aug. 12.
High prices may bring little relief for central bankers and policy makers struggling to cool global inflation. Sugar, corn and cooking oils helped push the United Nations World Food Price Index to a record in February, while in June the gauge stayed near an all-time high, potentially worsening the lives of the 1.1 billion the World Bank says live on less than $1 per day.
“Even this surplus is probably not enough to be taken by importers to replenish their stocks, without increasing prices considerably,” Baron said in Cebu yesterday.
Indonesia may purchase 2.6 million tons, overtaking Russia as the third-largest buyer after the U.S. and the European Union, he said. China may purchase 2.5 million tons in the year from October, exceeding its usual import quota of 1.9 million tons.
“We already have corn and sugar with the best fundamentals,” Paul Deane, an agribusiness economist at Australia & New Zealand Banking Group Ltd. (ANZ), said from Melbourne on Aug. 12. They “will keep global food prices close to their highs,” he said in an interview.
Indonesia’s purchases may be bigger than Baron’s forecast. The nation is forecast to buy 2.841 million tons, from 2.482 million tons a year ago, Faruk Bakrie, chairman of the Indonesian Sugar Association, said at a conference in Cebu today.
The raw variety has climbed 36 percent from this year’s low in May on concern that production in Brazil, which represents about half of global exports, will decline more than forecast.
The crop in Brazil’s Center South, the world’s largest producing region, will total 31.6 million tons from a July 13 estimate of 32.4 million tons, Sao Paulo-based Unica, a sugar- cane industry association, said Aug. 11.
The ISO’s 4 million-ton surplus included a drop in Brazil’s total output to 38.5 million tons from about 40 million tons, and increases in harvests in Thailand and India, which may help meet rising import demand of countries seeking to rebuild their stockpiles, Baron said.
Thailand’s output may slip from a record 9.64 million tons to 9.5 million tons in the year from November after flooding and excessive rains in some parts of the country, and drier-than- normal weather in other parts, cut cane yields, Rangsit Hiangrat, director at the Office of the Cane and Sugar Board, said today.
The estimate of Thai exports will be formalized as cane harvesting progresses, he said. Still, the nation will remain a major supplier even with the dip in output, he said.
India, the world’s second-largest producer, may boost output to 26 million tons in the 2011-2012 season, from 24.2 million tons a year earlier, Abinash Verma, director-general of the Indian Sugar Mills Association, said at the conference.
The nation may have a 4 million-ton surplus and “large quantities” may be exported as producers seek higher returns after local prices fell below international rates, Verma said. India has the world’s second-lowest sugar price, he said.
The group is surveying cane acreage through satellite mapping and, if the result confirms their output forecast of 26 million tons, it will submit the finding to the government and ask officials to set an export target by December, Verma said.
Global sugar inventories may take two years to be rebuilt after demand outpaced supplies in the past two seasons, Sergey Gudoshnikov, senior economist at the ISO, said July 26. Smaller crops in 2008-2009 and 2009-2010 left a deficit of 15 million tons, Gudoshnikov estimated.
The ISO forecast for the 2011-2012 surplus, which Baron said is the organization’s first based on supply and demand from more than 150 countries, compares with predictions of 9.8 million tons from Rabobank International, 5 million tons from Macquarie Group Ltd. (MQG) and 10.3 million tons from Czarnikow Sugar Futures Ltd.
Kingsman SA, the Lausanne, Switzerland-based brokerage, said July 25 the surplus in 2011-2012 may be 2 million tons smaller than its May estimate of 10.575 million tons, as the crop in Brazil will be less than initially estimated.
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