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Sugar to Pile Up as Demand Stays Weak, Kingsman Says

Sugar to Pile Up as Global Demand Stays Weak
A worker carries a bag of refined sugar in a warehouse at the processing facility of Compania Azucarera Salvadorena, in El Salvador. Photographer: Juan Carlos/Bloomberg

Sugar, trading near a two-year low, is set to pile up in producing countries next season as a lack of demand amid a global surplus forces growers to hold back supplies, according to Kingsman SA.

“Sellers will struggle to get buyers for raw sugar in the season starting October,” Jonathan Kingsman, chief executive officer of the Lausanne, Switzerland-based researcher and broker, said in an interview in New Delhi. “Indonesia will be the biggest raw sugar importer in the absence of Russia and China. Prices will remain under pressure in the next six to 12 months on excessive supplies.”

Futures dropped to a two-year low in New York last week after drier weather in Brazil, the world’s biggest producer of the sweetener, accelerated harvesting, while improvement in rains last month in India improved crop prospects, the second-largest grower. The sweetener has declined 31 percent in the past year on expectations that global supplies will top usage.

Supplies will exceed demand by 8.7 million metric tons in the 2012-2013 season, below a June forecast of 9.3 million tons, Kingsman said Aug. 31. That follows a surplus of 10.1 million tons in the current season.

“Sugar will have to be stored on lack of demand,” Kingsman, who has traded the sweetener for more than three decades, said yesterday. “Stockpiling will be at the sources, not at the destinations.”

Brazil Harvest

Societe Generale SA cut its forecast for raw-sugar futures in the fourth quarter by 2 cents to an average of 21.5 cents a pound as dry weather allowed the harvest to accelerate in Brazil, analysts led by Michael Haigh, New York-based global head of commodities research, said in a report yesterday.

Output from Brazil’s center south region, the main growing region, may climb to 35.8 million tons in the 2013-2014 crop season from 32.8 million this year, said Kleber Andrioli, an analyst at Macquarie Bank. Exports may increase to 25.5 million tons next year from 22.7 million tons, and futures may average 16 cents a pound, he said.

Raw sugar for October delivery was little changed at 19.42 cents a pound on ICE Futures U.S. in New York at 5:34 p.m. in Mumbai. The price touched 18.81 cents on Sept. 6, the lowest since August 2010.

Global production will be 180 million tons in the year starting in October, compared with 177.6 million tons this season, according to Kingsman. Consumption is forecast to total 171.3 million tons, exceeding 167.5 million tons this season, the researcher said last month. Demand may increase by a further 32 million tons by 2020, Kingsman told an annual industry conference in New Delhi today.

Indian Exports

India, which is exporting sugar for a second year, may have a surplus of 2 million tons for shipments next year, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd., said in an interview. The country will have sufficient supplies to meet demand, allowing exports for a third year, Food Minister K.V. Thomas said.

Production in India may total 24.5 million tons in 2012-2013, compared with a local demand of 22.5 million tons, Kumar said. The nation is set to produce 26.2 million tons in the year ending Sept. 30, he said.

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