Sugar may advance 6 percent by December as China, the second-biggest user, and Indonesia replenish stockpiles and the crop declines in Brazil.
Futures in New York could gain to 29 cents a pound, according to the median in a Bloomberg News survey of eight exporters, importers and traders at a conference in Cebu, the Philippines. October-delivery traded at 27.36 cents today.
More expensive sugar may bolster near-record global food costs and make it harder for central bankers and policy makers to curb inflation. Food prices are close to their peak in 2008, with corn and sugar helping fuel a 33 percent gain in the past year, according to the World Bank. That may worsen the lives of the 1.1 billion the bank says live on less than $1 a day.
“The stocks-to-use is quite tight, which is keeping prices high,” said Adam Tomlinson, Rabobank International’s Food & Agribusiness Research and Advisory director, in an interview. “That’s why you got countries like China managing their reserves, adding 1 million tons to their imports.”
A surplus of about 4 million metric tons in the year starting October will probably not be enough to allow importers like China and Indonesia to replenish their inventories without a considerable increase in prices, said Peter Baron, executive director of the International Sugar Organization.
The market may have a “technical blip” to 30 cents, he said in an interview Aug. 14 and predicted prices will stay high. Futures averaged 12.81 cents in the past 10 years.
China could purchase 2.5 million tons, exceeding its usual import quota of 1.9 million tons, Baron said. Indonesia may buy 2.84 million tons, up from 2.48 million tons the previous year, said Faruk Bakrie, chairman of the Indonesian Sugar Association.
The Asian region will have a 6 million ton shortage in the season starting in October even as the global market swings to surplus, said Rabobank’s Tomlinson.
The harvest in Brazil’s Center-South, the world’s largest producing region, will fall short of previous estimates on lower-than-expected yields, the Unica industry association said. Output will be 31.6 million tons, down from a July 13 estimate of 32.4 million tons, Sao Paulo-based Unica said Aug. 11.
Sugar may exceed 29 cents if the Center-South crop is smaller, said Pedro Cortes, president of Energy Brazil. The yields may be 1.1 million tons below the latest estimate after drought, excessive rains and frost damaged crops, Cortes said.
Concerns that the global economy is slowing and a decline in managed-money investments in futures may limit gains, said Tomlinson. The bank forecast in July that prices may average 26 cents this quarter before slipping to 23 cents in the fourth.
Higher production in India, the second-largest grower, and Thailand will help make up for losses in Brazil, capping prices at 29 cents on a sustained basis, said Abinash Verma, director general of the Indian Sugar Mills Association, in an interview.
India may boost output to 26 million tons in 2011-2012 from 24.2 million tons a year earlier, said Verma.
The country could have a 4 million ton surplus in the coming season and large quantities may be exported as producers seek higher returns, Verma said. India has the world’s second-lowest domestic price, he said.
While the Thai government expects the harvest to slip to 9.50 million tons in the year from November from a record 9.64 million tons this year, the nation will remain a major supplier, Rangsit Hiangrat, director at the Office of the Cane and Sugar Board, said in an interview.
-- Editors: James Poole, Thomas Kutty Abraham