Sugar Traders Turn Most Bearish in Four Months on Indian Exports

Sugar traders are the most bearish in more than four months on speculation India, the world’s second-largest producer, will ship more sweetener this year, expanding a glut accumulated over the past three seasons.

Ten of 16 traders surveyed by Bloomberg said they expect raw sugar to decline next week, three were bearish and three were neutral. That’s the highest proportion of bears since the week ended Aug. 23. Sugar fell 16 percent last year, a third annual decline and the longest slump in more than two decades.

Global supplies outpaced demand in the past three years and another surplus of 4.73 million metric tons is forecast for the 2013-14 season that started Oct. 1 in most countries, according to the International Sugar Organization in London. Millers in India will probably seek to export after Agriculture Minister Sharad Pawar said last month they will receive financial assistance to make 4 million tons of the raw variety.

“We’ve got trade flow surpluses for the rest of the year and those will be exacerbated if India exports the full four million tons,” said Jonathan Kingsman, founder of Kingsman SA, a unit of McGraw Hill Financial Inc.’s Platts. “We are also seeing quite high stocks in China, but what’s really worrying the market at the moment is the talk of Indian exports.”

Futures traded in New York for March delivery fell 1.7 ercent yesterday to 15.48 cents a pound, the lowest settlement for a most-active contract since June 2010. Indian mills are seeking to increase exports to trim record losses as cane costs climb. Shipments may advance as the nation approved last month more than 60 billion rupees ($970 million) in interest-free loans.

Indian Crop

A near-record cane crop is “still on the horizon” for India, the ISO, which raised the nation’s output estimate by 1.5 million tons to 26.5 million tons in November, said in a report e-mailed yesterday. That would add to global inventories the U.S. government forecast at a record 43.379 million tons. Global sugar purchases will probably decline 4.4 percent to 52.9 million tons in 2013-14, the ISO said.

“The consensus fundamental expectation currently is for high stocks, excess supply, more restrained demand and producer selling into strength,” James Cassidy, the head of the sugar trading desk at Newedge Group in New York, wrote in an e-mailed report yesterday. A “negative” fundamental bias “should be reinforced by commercial re-selling, latent producer selling and potential Indian exports into strength.”

Raw sugar futures for delivery in March yesterday traded at a discount of as much as 0.21 cents a pound to the May contract, the biggest price gap since the spread started trading in June 2011. That market structure, in which earlier-dated contracts are priced below later ones, is known as contango or carry and may signal ample supplies.

“The carry structure and the falling market are a sign of high stocks at destination,” Kingsman said. “We’ve got a build-up of stocks, falling Chinese prices, potential Indian exports. All of this is quite bearish and the market is trading accordingly.”

Raw sugar survey results: Bullish: 3 Bearish: 10 Hold: 3
White sugar survey results: Bullish: 3 Bearish: 10 Hold: 3
White sugar premium results: Widen: 5 Narrow: 5 Neutral: 6
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