Nov. 21 (Bloomberg) -- Sugar prices are likely to remain around current levels as the cane crop declines in top global producer Brazil, according to HSBC Global Research.
Cane output in the Center South, Brazil’s main producing region, will be 488.5 million metric tons in the 2011-12 season that started in March, according to industry group Unica. That compares with 556.9 million tons a year earlier.
“In the near term, sugar prices should remain near current levels as the weak Brazilian harvest offsets improvements in Northern Hemisphere production,” Pedro Herrera, a Latin America agribusiness analyst at HSBC, wrote in a report e-mailed today.
Raw sugar is unlikely to fall below 20 cents a pound, according to Herrera, who singled out that level as the cost of production. He cited the “weak” harvest in Brazil, a “low probability” of unrestricted sugar exports from India and higher output costs. The Asian nation is the world’s second-biggest sugar producer.
Prices are set to weaken in the “medium term” as larger crops in the European Union, Russia, India and the Black Sea region leave supply outpacing demand, according to the bank.
“We expect improvements in the Northern Hemisphere harvests to provide a sugar surplus,” Herrera said. “The peak of sugar prices may be behind us.”
White, or refined, sugar for March delivery advanced 0.3 percent to $625 a ton by 11:42 a.m. on NYSE Liffe in London, leaving prices down 20 percent this year. Raw sugar for March delivery rose 0.5 percent to 24.08 cents a pound on ICE Futures U.S. in New York, for a 25 percent annual drop.
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