Bloomberg News

Raw Sugar May Near 20 Cents by End of Year, Macquarie Says

November 25, 2011

(Updates with supplies in second paragraph.)

Nov. 25 (Bloomberg) -- Raw-sugar prices, which are down 29 percent this year, may fall further towards 20 cents a pound by the end of the year on improved supplies from the Northern Hemisphere, according to Macquarie Group Ltd.

Sugar supplies will outpace demand by 4.5 million metric tons in the 2011-12 season started last month, the London-based International Sugar Organization estimated. Production in Russia, usually an importer, will climb to 5.3 million tons, Macquarie said. In Thailand, the cane crop will reach 100 million tons even after floods delayed the crush, it added.

“New crop supply pressure from Northern Hemisphere producers is beginning to weigh on the market,” Kona Haque, an analyst at the bank in London, wrote in a report dated yesterday. “We wouldn’t be surprised to see prices fall further towards 20 cents a pound by year-end.”

Raw sugar for March delivery fell 0.9 percent to 22.89 cents a pound by 9:16 a.m. on ICE Futures U.S. in New York. The price touched 22.71 cents, the lowest since June 2. White, or refined, sugar for March delivery slipped 0.2 percent to $601.70 a ton on NYSE Liffe in London.

Prices for the sweetener will weaken until the second quarter next year and may rebound after that on “bullish Brazilian supply-side issues,” according to the report.

Producers in the South American country may use their sugar cane to produce ethanol at the expense of sugar if prices fall too far, Macquarie said, adding that at present prices below 21 cents a pound would encourage millers to turn to the biofuel.

--Editors: Sharon Lindores, Dan Weeks

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net


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