The sugar market will swing to a deficit as sustained low prices curb supply for a second year, according to Rabobank International, which joined Czarnikow Group Ltd. and Kingsman SA in forecasting an end to surpluses.
Global output of raw sugar will fall short of demand by about 900,000 metric tons in the 12 months from October, Rabobank said. That compares with glut of 1.4million tons in 2013-2014, the bank said in an e-mailed quarterly report.
Raw-sugar prices dropped more than 50 percent from a 30-year high in 2011 as world supplies consistently surpassed demand. Global output will lag behind consumption by 500,000 tons in 2014-2015 as production stabilizes, London-based Czarnikow forecast last week. The degree of supply tightening depends on how a forecast EI Nino develops, Rabobank said.
“It is a little early to be certain that the market is passing an inflection point,” the bank said. “If the question is whether we are cycling towards higher prices, our current belief is that we are indeed heading in that direction, slowly, with may be a bump or two on the road still to come.”
An El Nino, which can bring drought to the Asia-Pacific region and heavier-than-usual rains to South American, likely to develop by Australia’s spring, which starts in September, the country’s Bureau of Meteorology said on July 1. There’s at least a 70 percent chance of the event developing this year, it said.
Raw sugar for October delivery closed at 17.07 cents a pound on ICE Futures U.S. in New York on July 11, 4 percent higher this year. The commodity lost 16 percent in 2013, retreating for a third year in the longest run of annual declines since 1992.
Global sugar demand will exceed production by 239,000 tons in the crop year from October 2014 to September 2015, Lausanne, Switzerland Kingsman SA estimated in May.
Source from Myanmar Business Today, 24-30 July,2014