Sugar May Fall Below 19 Cents Soon, Marex Spectron Says
The price of raw sugar traded in New York may fall below 19 cents a pound “very soon,” prompting processors in top producer Brazil to make ethanol rather than the sweetener, Marex Spectron Group said.
Sugar has fallen 8.4 percent on ICE Futures U.S. in New York this year, as supplies outpace demand by 6 million metric tons, up from a previous forecast of 5.2 million tons, according to the International Sugar Organization in London. The price was at 21.34 cents a pound by 6:28 a.m. Below 19 cents a pound, millers in Brazil would favor production of the biofuel, Marex Spectron said, referring to the variety used in flex fuel cars.
“Logically, sugar prices have to go down below that level very soon, before the crop gets into full swing,” Paul Bannister, head of sugar brokerage at the company in London, wrote in a report e-mailed today.
Sugar prices may need to go “well below” 19 cents and stay at such levels “for a major part of the harvest” to trigger millers to switch to maximum ethanol production, he said. The harvest in Brazil, which usually begins in April, is set to start on May 1, according to ICAP do Brasil Ctvm. Millers there make both ethanol and sugar from raw material sugar cane.
“Even if most mills make the maximum of ethanol and minimum of sugar, there will almost certainly still be a reasonable sugar surplus,” Bannister said.
To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net
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