Raw sugar prices may fall below 20 cents/lb. by the end of the year, driven by second consecutive sugar surplus during the 2012/2013 year, researcher says

Andrew Rogers

LOS ANGELES , February 28, 2012 (Industry Intelligence) – Market researcher F.O. Licht GmbH said that a second consecutive projected sugar surplus during the 2012-2013 crop year may reduce the price of raw sugar to less than US$0.20 per pound by end of year, Bloomberg reported Feb. 28.

The lower price of raw sugar may potentially boost sugar sales as importers attempt to restock, F.O. Licht added.

It could also potentially lead to an extension of the ongoing decline in the cost of food worldwide.

According to data compiled by the United Nations’ Food & Agriculture Agency, global food costs, which reached a record high in February 2011, have since fallen 9.9%.

Although declining to provide a precise estimate, F.O. Licht senior commodity analyst Stefan Uhlenbrock, said that this season’s surplus may potentially be less than 5.8 million tons.

Following three years of stagnant demand, the decline in the price of sugar this season may lead to a 2.4% increase in the demand for sugar—a normal rate, said Uhlenbrock.

He added that demand is particularly likely to increase in Africa, China, and Pakistan.

F.O. Licht managing director Christoph Berg said that the sugar surplus could potentially counteract any price support for sugar as a result of an increase in oil prices, and the higher price of crude oil could potentially lead to increased ethanol production.

On Feb. 28, Olam International Ltd. senior analyst John Stansfield estimated that there will be a 9 million ton sugar surplus in 2012-2013, and that the supply may outweigh demand by as much as 7 million tons.

Stansfield added that sugar output in both China and Thailand will increase, and that crops in Brazil are recovering.

A decline in prices will likely lead to an increase in consumption, Stansfield said.

The primary source of this article is Bloomberg, New York, New York, on Feb. 28, 2012.

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