Tag Archives: refined sugar

Sugar surplus puts downward pressure on prices

Surplus sugar continues to put downward pressure on prices as the Brazilian harvest gathers pace in the world’s largest exporter.  While Thailand is expected to export in excess of 7.5m tonnes in its 2012/13 season down slightly from last year.

The nearest month October raw sugar contract closed at 20.42 cents per lb while December white sugar closed at $574.50 per tonne.

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World Sugar Outlook 2012

A consensus of analysts see sugar prices falling during 2012 with the world sugar surplus seen at just under 8 million tonnes in 2011/12 and falling to just over 3 million tonnes in 2012/13.  This is somewhat dependent on whether output will fully recover in the world largest producer Brazil, the amount of cane diverted to produce ethanol and exports from India.  Nevertheless, the surplus for 2011/12 creates a likely bearish market during 2012.

A fall in sugar prices may result in Brazilian millers diverting sugar to ethanol production.  Large harvests in Europe, India and Thailand have resulted in a higher world surplus.

It is believed that Brazil’s production will not recover significantly as the lower production figures are not due to weather or the amount of cane diverted to ethanol production but mainly due to older rations and lower yields.  Therefore, investment is required for an increase in yields and higher Brazilian production.

Raw sugar prices are forecast at around 22 cents during the second quarter during the Brazilian centre south harvest and at around 24 cents at the end of 2012.  White sugar is forecast at around $600 during the second quarter and around the same at the end of 2012.  Weather patterns could alter this forecast price projection.

The weather phenomena La Nina and El Nino are factors potentially impacting sugar supply.  La Nina tends to result in drier weather in the centre south of Brazil thereby delaying crops, harvesting and crushing.  El Nino which follows La Nina after the second quarter gives wetter conditions potentially impacting sucrose content.    La Nina also results in heavy rains, flooding in the Asia-Pacific region and occasional drought in Africa and South America.

White sugar is currently trading around $626.50 and raw sugar at 24.62 cents.

A major factor determining sugar prices during 2012 will be the price of ethanol and as a consequence the decisions by Brazilian mills to divert cane to ethanol production.  The ethanol parity is currently around the 20 cents a pound for raw sugar.  Below this raw sugar price mills would be expected to convert cane to ethanol and not to sugar.

Brazil likely to lower ethanol mix in gasoline adding to sugar supplies

Brazil may announce that it is lowering the percentage of ethanol required to be mixed in gasoline.  The primary source of ethanol in Brazil is from sugar cane and if the requirement for 25% ethanol is eased to 18% this would free up sugar supplies that would have otherwise been diverted to ethanol production.

Sugar futures declined on the news. The news follows a reported drop in cane production in Brazil’s center south due to older ratoons and lower yields.

 

Delays at the port of Paranagua, Brazil

The railway that transports softs to Brazil’s second  port of Paranagua has reopened at a time when the main roads to the port are closed following heavy rains that damaged bridges, roads and railways in the area.   The America Latina Logistica railway is now operational beyond the Serra do Mar Mountains and the area leading to the port.

Trucks are in a line up some 50 km from the port and movement is restricted and slow.  Most of the highway was damaged due to heavy rains and mudslides.  Traffic in both directions is now proceeding with delays on one of the four lanes.

Naturally, there will be delays experienced in shipments from Paranagua.  The repairs required for the highway to be reopened and become fully functional may last three months.

Russian raw sugar imports down in February despite bad beet harvest

Imported raw cane sugar to Russian refineries dropped in February relative to 2010 in anticipation of the cut in duty on imported sugar says the Russian Sugar Producers Union. In late 2010 import of raw sugar by Russian refineries had been up following a bad beet harvest. The bad harvest was due to drought.

Sugar refineries in Russia refine beet sugar during the beet season and then once the beet season is over, in February, refine cane sugar.

India’s OGL sugar exports doubtful

Raw sugar futures were up almost 2% heading for 30 year highs once again to close at 32.64 cents per lb.  The rise was after India announced that it had revised down its production outlook for 2010/11 from 26 million tonnes to 24 million tonnes.  Weather conditions have decreased the expected percentage of sugar recovery.  The announcement is also likely to delay and diminish the chances of a positive outcome under India’s Open General Licence for sugar exports, thereby adding to world supply concerns.

Sugar price volatility is expected to remain high until the prospects for sugar supply become clearer.

Raws end higher but trend may reverse

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.