Sugar output in 2013-14 may drop because world market prices are approaching the cost of production in exporting countries, Czarnikow Group Ltd. said.
The low prices will mean sugar will take market share from alternative sweeteners, “which should lead to a general rise in disappearance,” London-based Czarnikow said in a statement today. Production costs will probably keep climbing, boosting demand for agriculture credit and risk for lenders, it said.
“With sugar prices approaching cost of production, producers will be under pressure to generate returns and consumers should continue to benefit from rising affordability,” Toby Cohen, a Czarnikow director, said in the statement. Czarnikow traded sugar in more than 90 countries last year and has 10 regional offices, according to the statement.
Raw sugar futures have dropped 3.7 percent this year on top of last year’s 16 percent decline. The 2013-14 marketing year starts in October in most countries.
Money managers were net short, or betting on lower prices, as of Jan. 22 for the first time since November 2007, according to U.S. Commodity Futures Trading Commission data. “The large short speculative futures positioning leaves the market vulnerable to shocks against the bearish consensus,” Peter de Klerk, an analyst at the company, said in the statement.
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