With current supply and demand figures we could perhaps see a white sugar price of $500 per MT by the end of the year. If there is such a fall there would be a similar fall in raw sugar prices. A white sugar price of $500 implies a $100 fall in prices per MT from current levels of over $600 per MT.
There are however a few assumptions to this. Namely, that production is not impacted negatively in Brazil and India, the weather does not have any surprises in store for the market and that the line-up of vessels loading sugar at Brazilian ports does not continue to grow significantly beyond the 100 at present waiting to load.
The above does is not intended as investment advice and is solely for academic purposes.
The number of vessels lining up to load sugar at Brazilian ports has continued to increase giving support to sugar prices which bounced back today after coming off recent 7 month highs. Both raw and white sugar futures rose in New York and London respectively but without revisiting previous 7 month highs. Over 100 vessels are now waiting to load sugar at Brazilian ports.
Excessive rains in India are also thought to have given sugar prices some support. Production figures will be watched to establish if output is likely to decrease. If production figures are seen declining significantly it is likely that this will result in further upward support of sugar prices. However, if the expected 10% fall in production is offset by higher production elsewhere in India then recent heavy rains will have had no significant overall impact on production or prices.
Meanwhile as a result of poor harvests this year and last Mexico is to import 100,000 MT between 10% and 15% of which is expected to come from Nicaragua. Mexico will not apply a tariff to the Nicaraguan sugar and will only charge up to 10% of the usual $360 per MT tariff to the remaining imports.
The above factors may see the markets test recent 7 month highs tomorrow.
Today ICE raw sugar October futures touch seven month highs of 25.60 cents per lb subsequently falling to close lower on the day at 24.30 cents. London white sugar also closed lower at $607.80 per MT. Despite investors buying sugar futures and rumours of demand from Pakistan sellers pushed the contract lower.
While gold reached new highs sugar fell along with other soft commodities despite Brazil being hit by a dry spell raising fears that supply will be impacted. Russia is also thought to be holding 5m tonnes in stock less than previously claimed. Despite both these factors and Pakistan expected to be in the market for sugar shortly, futures were unable to sustain their seven month highs. This despite a long line up of ships at Brazilian ports loading sugar.
The rise may have been unsustainable due to rains forecast in south-east Brazil which is likely to ease concerns over supply.