BLBG: Sugar Prices Seen Sustained as Buying by China, Indonesia to Drain Surplus
China and Indonesia will boost sugar imports to replenish stockpiles, helping to drain a global surplus of about 4 million metric tons and keep prices high, the International Sugar Organization said.
Indonesia may increase purchases to 2.6 million tons, overtaking Russia as the world’s third-largest buyer after the U.S. and the European Union, Executive Director Peter Baron said. China, the second-biggest consumer, may buy 2.5 million tons in the year beginning October, exceeding its regular import quota of 1.9 million tons, he said.
Sustained sugar prices may mean no relief for central bankers and policy makers struggling to cool inflation. Sugar, corn and cooking oils helped send the United Nations Food Price Index to a record in February, while in June the gauge climbed for the 10th time in the past 12 months, staying near an all- time high and potentially worsening the lives of the 1.1 billion the World Bank says live on less than $1 a day.
“Even this surplus is probably not enough to be taken by importers to replenish their stocks, without increasing prices considerably,” Baron said in an interview in Cebu, central Philippines yesterday.
Prices may range between 23 cents and 28 cents a pound in New York on a longer-term basis and the market may see “a technical blip to 29 and 30” cents, Baron said. Raw sugar for October delivery ended at 27.84 cents a pound on Aug. 12.
Food Prices
“We already have corn and sugar with the best fundamentals,” Paul Deane, an agribusiness economist at the Australia & New Zealand Banking Group Ltd. (ANZ), said in an interview from Melbourne on Aug. 12. They “will keep global food prices close to their highs over the last two or three years.”
The raw variety has climbed 36 percent from this year’s low in May on concern that production in Brazil, which represents about half of global exports, may decline more than forecast.
The sugar crop in Brazil’s Center South, the world’s largest producing region, will total 31.6 million tons from a July 13 estimate of 32.4 million tons, Sao Paulo-based Unica sugar-cane industry association said Aug. 11.
The ISO’s 4 million ton surplus included a drop in Brazil’s total output to 38.5 million tons from about 40 million tons and increases in harvests in Thailand and India, Baron said.
Global sugar inventories may take two years to be rebuilt after demand outpaced supplies in the past two seasons, Sergey Gudoshnikov, senior economist at the ISO, said July 26.
Surpluses Estimated
Smaller crops in the 2008-2009 and 2009-2010 seasons left a deficit of 15 million tons, Gudoshnikov estimated.
The ISO forecast for the 2011-2012 surplus, which Baron said is the organization’s first outlook based on supply and demand from more than 150 countries, compares with forecasts of 9.8 million tons from Rabobank International, 5 million tons from Macquarie Group Ltd. (MQG) and 10.3 million tons from Czarnikow Sugar Futures Ltd.
Kingsman SA, the Lausanne, Switzerland-based brokerage and researcher, said July 25 the sugar surplus in the 2011-2012 season may be 2 million tons smaller than its May estimate of 10.575 million tons, as the crop in Brazil, the largest grower, will be less than initially estimated.
-- With assistance from Isis Almeida in London. Editors: James Poole, Ovais Subhani
To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net
To contact the editor responsible for this story: James Poole in Singapore at jpoole4@bloomberg.net
