Sugar May Drop as Climbing European, Asian Supplies Fill Brazil Shortfall

Sugar prices may drop at least 13 percent by early next year as an increase in supplies from Europe and Asia counter a drop in production in Brazil, according to broker and researcher Kingsman SA.

The March-delivery contract may drop below 25 cents a pound on ICE Futures U.S. in New York starting January, Managing Director Jonathan Kingsman, said in a phone interview from Lausanne, Switzerland, yesterday. The contract traded 1 percent lower at 28.69 cents a pound at 5 p.m. in Mumbai.

A drop in prices of the sweetener, used in everything from cereals to candy, may help cap global food costs tracked by the United Nations that advanced to a record in February. Kingsman joins Rabobank International and Goldman Sachs Group Inc. in predicting lower sugar prices, citing increased supplies. Goldman Sachs forecasts the price may fall to 20 cents a pound in 12 months, it said in an Aug. 11 report.

“We would expect prices to ease but not fall dramatically on higher global production,” Kingsman said. “The surplus will mainly be in white sugar next year.”

Production gains in Russia, the European Union, Thailand and India may help the global sugar surplus to reach 9.5 million metric tons in the 2011-2012 season, Rabobank International said on Aug. 24. The surplus may be used to replenish global inventory, it said. It may take two years to rebuild stockpiles pared by a 15 million-ton deficit left by smaller crops in 2008-2009 and 2009-2010, Sergey Gudoshnikov, senior economist at the International Sugar Organization said on July 26.

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