Thursday 27 January 2011 – Europe facing expected sugar supply shortages announced that it would permit additional imports over and above set quotas. The news resulted in a rally in sugar prices with March white sugar futures gaining $25 or 3.15% to close at $824.50 and March raw sugar futures up 1.05 cents to close at 34.18 cents.
Russia also announced that it may decrease import duties on raw sugar which also provided prices with support.
The gains were corrected somewhat on Friday 28th January 2011 with March white futures down $10.
Initial forecasts indicate that sugar supply roughly equals demand for 2011. This position can easily tip into a surplus or deficit. Unexpected weather and line up delays can exacerbate the impact on prices. In 2010 there was a line up of over 100 vessels during Brazil’s cane crush. With some vessels waiting more than a month to load at ports.
A rise in prices is expected during the first quarter of 2011 prior to Brazil’s harvest followed by a fall upon farmers planting more incentivised by rising prices.
The center south Brazilian May 2011 harvest is likely to be around 580 million. Should this be lowered by 20 million tones or should the US dollar fall significantly then there could be upward pressure on sugar prices.
Raw are not expected to break 35 cents per lb, possibly flirting with recent 30 year highs again and may then fall to a year’s low of 25 cents per lb during the year. Whites are expected to break above $800 per tonne also flirting with recent highs and falling during the year to a low in the region of $650.
Unless the weather or Brazil’s ports decide otherwise!
The week saw raw sugar ending up higher with March raws ending up 3% or 1 cent to close at 32.33 cents per pound. March white sugar gained 2.9 percent to close at $790.70 a tonne. On the technical front the next resistance level is seen at 33.3 cents while support is seen at 32 cents.
News on Indian exports and weather in Australia could swing sugar prices either way. Markets await news concerning India’s exports and forecast rain in Australia. Recent rain in Australia has negatively impacted the old crop as well as the new developing crop. Over 5 million tonnes have not been harvested and further rains could jeopardise the already saturated crop.
China may see an easing of demand for commodities as it seeks slower growth and to control inflation. However, China also needs to rebuild its inventories to satisfy demand. While in South America, Mexico expects to produce 0.5 million tonnes more sugar than during the 09/10 harvest.
In Berlin agricultural ministers from 48 countries said that they were concerned that speculation was causing volatility in international markets threatening food security and supply. The current protests in Tunisia were initially sparked off by rising food costs and lack of employment opportunities.