Sugar may gain as much as 12 percent in the fourth quarter from current prices, supported by “strong demand” in Asia, before likely declining next year as output from Brazil and India expands, producers and analysts said.
“We may see sugar trade in a range of 15 to 19 cents a pound over the next four months, driven by demand in Asia,” said Parin Amatyakul, vice president of Mitr Phol Sugar Corp., the largest miller in Thailand, the second-biggest exporter.
Prices of raw sugar have surged 32 percent from a one-year low of 13 cents a pound on May 7 on speculation that demand will increase in Indonesia and China, the world’s second-biggest consumer. Raw sugar for October delivery on ICE Futures in New York dropped 1.2 percent to 16.97 cents a pound yesterday.
Prices more than doubled last year as crop damage in Brazil and India, the biggest producers, crimped supplies. Refined sweetener peaked at $767 a metric ton in January and raw sugar touched a 29-year high of 30.4 cents a pound the following month, before tumbling on speculation that farmers in the two nations would increase plantings, raising output.
“Strong demand coming out of Asia and the Middle East supports prices,” Peter McGuire, managing director at CWA Global Markets Pty., said by phone from Sydney. “We’re bullish on the sugar outlook and will not be surprised to see it at 17.5 to 18.5 cents at the start of the fourth quarter,” he said before the 16th Asia International Sugar Conference, which begins today in Bali, Indonesia.
The Philippines will buy 150,000 tons of sugar for delivery by September to cover requirements after milling was delayed, Agriculture Secretary Proceso Alcala said July 9. The Philippines plans to “fast track” sugar imports, Alcala said.
“Demand in Asia will support sugar prices in the range of 16-17 cents a pound in the fourth quarter,” Prasert Tapaneeyangkul, secretary-general of the Office of the Cane and Sugar Board, said from Bangkok on July 13. “Although Brazil’s output will increase, its distance is quite far to supply hefty demand in the region, while Indian crops are still uncertain.”
Thai sugar output in the season starting November may plunge by as much as 13 percent from the previous year to about 6 million tons as delayed rain and subsequent floods will likely damage cane crops, Prasert said.
Still, raw-sugar prices may tumble in the fourth quarter as bigger harvests from India and Brazil, the two largest producers, swell supplies and the global market shifts to a surplus, according to researcher F.O. Licht.
Futures in New York may decline to between 13 cents and 15 cents a pound between October and December, Stefan Uhlenbrock, an analyst at the Ratzeburg, Germany-based researcher, said in an interview on July 12.
“The price is unlikely to fall below 14 cents in the first quarter of 2011 as buyers are likely to accumulate sugar near that level,” Mitr Phol’s Parin said from Bangkok.
Indian crop prospects are “quite good,” Uhlenbrock said. “Output may be as much as 26 million tons of white-sugar value,” he said, referring to the refined product. “If production comes in at this level, there could be a case for India to export as much as 1 million tons next year.”
India may have enough sugar to ship at least 1 million tons in the year from Oct. 1, entering the export market for the first time in two years, Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd., said on July 9.
India may produce 25 million tons in the 2010-2011 year, up from an estimated 18.7 million tons this season, according to the Indian Sugar Mills Association. That may swell a global surplus forecast at 5.64 million tons by Fortis Bank Nederland and VM Group. The International Sugar Organization said in May the surplus for the year from October may total 2.5 million tons.
Brazil is expected to harvest a record sugar-cane crop of about 41 million tons in the coming season, Peter Baron, the organization’s executive director, said in an interview yesterday. The country is forecast to produce 36 million tons in the current season.