Australian sugar analysts are suggesting that global sugar prices ‘will stay fairly firm for the next 12, maybe 18 months’. Prices have risen 98% in the past year following ‘adverse weather in Brazil and India’ and increased global demand. However it is expected that in the longer term, ‘high prices will encourage increased production’. According to German researcher F.O. Licht, ‘global sugar consumption will climb 2.6% to 165.4 million metric tonnes in the season that began on 1 October, exceeding production for a second year’. While there has been some expansion of production in response to higher prices, this will only reduce the supply deficit from 10.7 million tonnes to 6 million tonnes. The stock-to-consumption ratio is expected to drop to about 35%. Meanwhile press reports based on technical analysis by LaSalle Futures Group in Chicago suggest that world sugar prices ‘may jump as much as 19% to 27 US cents’, although it suggests there is an equal chance that it will fall 12% to 20 cents/lb.
Bloomberg.com, 20 November 2009
http://www.bloomberg.com/apps/news?pid=20601081&sid=aGD6sIkW.yEM#
Bloomberg.com, 13 November 2009
http://www.financialpost.com/news-sectors/trading-desk/story.html?id=221...
The high world market prices for sugar have created a situation where for some ACP sugar exporters it is currently more profitable to export to regional markets than to the EU. However, for certain major suppliers this shift in exports is not taking place, since contractual commitments to supply EU importers have been made. One impact of high world market sugar prices, however, is that ACP exporters are currently being insulated from the full effects of reductions in the guaranteed price for ACP sugar. On the basis of current projects, this situation looks likely to continue at least until October 2011. The critical issue for ACP sugar exporters then becomes what happens after this date in the context of the removal of EU price guarantees from 1 October 2012. Clearly ACP sugar exporters will need to set in place long-term sugar supply arrangements if they are to continued to be insulated from the full effects of the reductions in the EU guaranteed price for ACP sugar and the eventual elimination of price guarantees.