São Paulo – Sugar prices spent the year down and should not return to high levels in the near future, despite the problems that India, a large producer of the commodity, is facing with the crop. Specialists in the sector believe that the tendency in the short and medium term is for slight expansion in prices of the commodity. The product is one of the main items in the export basket from Brazil to the Arab world and the price significantly impacts the country’s revenues with sales to the Middle East and North Africa.
The director at Archer Consulting, Arnaldo Luiz Corrêa, specialized in the sugar market, believes that the tendency is for slight expansion late this year and early next year, an opinion shared by Tarcilo Rodrigues, a director at Bioagência, a company that operates in the trade of sugar and ethanol. Future contracts in the New York Stock Market show the same direction: contracts for October this year are at US$ 0.1971 per pound of sugar, whereas for March 2013 the going rate was US$ 0.2043 per pound, closing price on Thursday (13).
“Prices have already had a significant drop, the factors causing the reduction have already been exceeded,” said Rodrigues, referring to the global surplus of the product, with greater offer than demand over the year. “The tendency is for stability, with a small increase in the medium run,” says the specialist at Bioagência.
Brazil should have growth of 6.5% in the current sugar crop, to 596.6 million tonnes, and greater production of sugar, 8.41% to 38.9 million tonnes, according to projections by the National Food Supply Company (Conab). The country is the world’s main exporter of sugar, ahead of India, which is in the second place.
India will have 4% lower sugar production than initially forecasted due to a drought, but will still have a surplus for export. The country should produce 24 million tonnes of sugar. The forecast, prior to the drought, was for 25 million tonnes, according to information disclosed by the Indian Sugar Mill Association (Isma). The Indians should ship abroad around three million tonnes of sugar.
The Basic Food Manager at Conab, Wellington Teixeira, bets that prices should remain depressed or stable in coming months. He believes in slightly greater offer than demand, with recovery of the Brazilian sugarcane plantations and producers investing more in crops. “If Brazil has an excellent crop, chances that the price should drop are great, and we should flood the market with products,” said Teixeira.
Specialists prefer not to make long-term forecasts, as there are some factors that should affect sugar pricing, like climate conditions for the next crop, in Brazil and India, the profitability in Brazil of sugar against ethanol, which, in turn, depends on the price of petrol and the demand for fuels, as well as the demand for sugar in China and Europe. “There is already being a reduction in the price of industrialized products in Europe, said Teixeira, recalling that that includes sugar.
Production in India is unknown due to the profile of production. “There are 35 million small producers, and changes in culture are very fast,” said Corrêa, referring to the ease these farmers have in changing their cultivation from one product to another. As the price of some grain, like soy, is attractive, many may decide for these cultures instead of planting sugarcane, thus affecting the country’s sugar production. “Some trading companies are already working considering this possibility,” said Corrêa, recalling, however, that that should only become clear in March.
Brazil exported 7.7 million tonnes of sugar and confectionery products to the Arab world over the last 12 months up to August this year, as against 8.3 million tonnes in the previous 12 months. Revenues were US$ 4.3 billion, as against US$ 4.4 billion. Global production of sugar reached 170.9 million tonnes in the last cycle, 2011/2012, according to figures disclosed by the United States Department of Agriculture (USDA), and should reach 174.4 million tonnes in the 2012/2013 crop.
*Translated by Mark Ament
