There are contrary reports on future trends in world sugar prices. ED & F Man, suggest prices could remain between the 8 and 8.5 cents per lb level ‘due to the weight of Brazilian and Indian supplies’, with India expanding sugar exports with the benefit of export subsides. ISO reports that the global sugar surplus ‘may reach 9.2 million metric tons this year’.
Meanwhile a report from Bloomberg, citing a leading hedge-fund manager, argues that sugar prices could more than double by the end of 2007 ‘sugar could be as high as 20 cents a pound by the end of this year’. It is believed that sugar is undervalued ‘relative to its ethanol value’ and hence some hedge-fund managers have started to buy it.
Brazil meanwhile has increased the level of ethanol which should be mixed with petrol. In southern Africa Illovo for its part has announced sugar-investment plans based on the assumption of a world market price in the medium term (the next 18 months) of 12 to 14 cents per lb.
The optimistic price assessment cited in the Bloomberg report however appears to be based on the assumption that some extreme weather phenomenon will disrupt supply, sending spot prices surging.