Sugar at record high over poor Brazilian crop

By Chris Flood

Published: December 18 2009 02:00 | Last updated: December 18 2009 02:00

White sugar prices hit a record high on Thursday, capping a rally that has seen prices rise 13.5 per cent in the past seven sessions.

Liffe March white sugar hit $680.7 a tonne, before slipping to $660 a tonne later, down 0.9 per cent on the day but up 107.5 per cent this year.
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News that Brazil’s sugar production will be 2.1m tonnes less than expected this year has triggered the latest rise. Conab, the national crop supply agency, forecast 2009-10 output at 34.6m tonnes, compared with September’s estimate for 36.7m tonnes.

Heavy rains have reduced the volume of sugar that can be extracted from Brazilian cane with yields falling to a record low. Traders warned there could be further disappointments with Brazilian output as wet weather has continued this month, making it difficult for mills to produce either sugar or ethanol from water-loaded cane.

ICE March raw sugar dipped 1.2 per cent to 25.64 cents a pound on Thursday after trading above the 25 cents a pound mark this week for the first time since 1981. Raw sugar prices have risen 117 per cent this year.

“There’s no reason to think that we have seen the high for sugar prices yet but the market is likely to remain tremendously volatile,” said Nick Hungate, executive director at Rabobank.

“So much buying has been delayed and we expect further interest from India, Pakistan, Mexico, Iran and Indonesia. Buyers don’t like these prices but it looks like they will have to pay up as we don’t anticipate a solution to the market’s supply problems anytime soon.”

Karim Salamon, an analyst at Sucden, said: “Even if sugar prices move to the 30 cents a pound level, it will not bring any new supply to the market and is therefore not a solution. Consuming countries such as India, Ukraine and China will be forced to delay imports and to reduce stocks to minimal levels.”

Mr Salamon said supply problems were unlikely to be alleviated until Brazil’s sugar mills started to process the new crop in March.