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24-4-2008 | Other news

To date, 2008 has been an eventful year for commodity markets, and the sugar market has been no exception. For the current sugar price, Rabobank Soft Commodities Monthly Report predicts the global supply/demand balance will be markedly tighter in 2008/09 than it is in 2007/08.

• NYBOT sugar prices fell sharply from highs in early March, largely due to index fund money withdrawals.
• 2007/08 stocks-to-consumption ratio expected to increase to 54.1%.
• Price outlook for 2008/09 appears more favourable based on fundamental forecasts.
• Slow down of Brazilian sugar exports in the second half of 2008 due to increased ethanol consumption.  

Sugar prices
Until the end of 2007, world market prices had been depressed, reflecting an enormous global surplus in the 2006/07 international crop year, and the prospect of a further substantial surplus in the current 2007/08 crop year. With global stock levels rising, world prices spent much of 2007 under considerable pressure.

World sugar fundamentals
The beginning of 2008 saw an abrupt change in the market, with prices rising swiftly early in the new year, a move that caught many market participants by surprise. From today’s standpoint, the fundamental picture for the year remains rather gloomy. Looking purely at supply, demand, stocks and export availability/import demand,
there would be little justification for international sugar prices to be substantially higher in 2008. 

India
Because the increase in global stocks over the past two years is concentrated in India, the picture is not quite as bad as the global stock statistics imply. India’s capacity to export is limited. Hence, although Indian stocks are expected to reach a high point in September 2008, most of this is effectively unavailable to the market given current infrastructural constraints.

Brazil
Meanwhile, in Brazil, the harvest in the Centre/South region will shortly be underway. Given the multitude of variables influencing Brazil’s sugar production, it is difficult to be categorical about production and export availability in the Centre/South in 2008/09.  

Anything that might cause prices to rise sharply in the coming months, which in turn could prompt more sugar production and less ethanol production in Centre/South Brazil, risks pushing the outlook for 2008/09 from a relatively balanced market towards another surplus.

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