Raw sugar futures, down 15 percent this year, are heading for a third annual decline, the longest slump since 1992. Prices slid as producers from Brazil to Australia, the third-biggest shipper, boosted output after futures reached a 30-year high in February 2011, despite worries about supply interruptions.
Prices struck a 3.5-year low point in London, at $442.10 a tonne. Last Friday on LIFFE, London’s futures exchange, the price of a tonne of white sugar for March dropped to $443.80 from $454.20 a week earlier.
Rainy weather in Brazil, the world’s largest producer of sugar, had delayed the harvest there in September and early October. Then a fire at a major Brazilian sugar-exporting terminal on Oct. 18 fanned fears of a near-term supply shortage and sent sugar prices above 20 cents a pound for the first time in about a year. But those fears proved unfounded and sugar prices have slipped in 31 of the past 38 trading sessions.
Global production will be 4.4 million metric tons higher than consumption in the 12 months started Oct. 1, Kingsman SA said in a report e-mailed today. That compares with a previous forecast of 4.7 million tons. Millers in Brazil’s center south, the nation’s main growing region, will process more cane this year, leaving less left over for 2014. The area is also set to make more ethanol next year.
“The bulk of the price decline is behind us,” said Nick Brooks, head of global commodities research for ETF Securities, an exchange-traded-product provider. “Our view is that a large part of the increase in supply is now in the price.”
But others say prices have further to fall. Shawn Hackett, president of Hackett Financial Advisors, a brokerage and consulting firm, said he thinks futures could trade as low as 13 cents a pound (NewYork ICE price is currently around 16.3 cents/pound). Sugar last settled around that level in April 2009.
“You need to get to that level to get [growers] to ease back on these massive production increases we’ve seen in recent years,” Mr. Hackett said.