The EU will allow an extra 350,000 metric tons of sugar exports in the 12 months ending in September, raising the limit for out-of-quota shipments to 1 million tons, the European Commission, the EU’s executive arm, said yesterday. Raw sugar futures fell 9 percent yesterday after the EU’s announcement. India may have a sugar surplus of 3.5 million tons this season, Farm Minister Sharad Pawar said yesterday.
“The markets are falling on panic liquidation,” said Jonathan Kingsman, managing director of Lausanne, Switzerland- based sugar broker Kingsman SA.
Raw sugar for March delivery dropped 1.68 cents, or 5.7 percent, to 27.98 cents a pound at 8:25 a.m. on ICE Futures U.S. in New York. Yesterday’s drop was the biggest in two years. White, or refined, sugar for March delivery fell as much as $93.60, or 12 percent, to $675 a ton on NYSE Liffe, the biggest drop since April 16, 2009. It was most recently down 7.8 percent at $715.50 a ton.
Surplus Outlook
Sugar prices in London only yesterday climbed to the highest since 1989 after crops were damaged by weather in Brazil, Russia, Thailand and Pakistan. Supplies have lagged demand for two years and this year the balance “remains fragile,” London-based C. Czarnikow Sugar Futures Ltd. said in a report this week. The global sugar surplus is estimated at 3.22 million tons by the International Sugar Organization.
Higher prices on the world market compared to the domestic market may have been the impetus for the increased export quota, Fabienne Pointier, an analyst at Kingsman, said yesterday.
The EU’s reference price is 404.40 euros ($554.23) a ton, said Sergey Gudoshnikov, an economist at the International Sugar Organization in London. The reference price is the basis for negotiations with importers and the sale of so-called intervention stocks.
The WTO in 2005 limited EU exports of subsidized sugar to 1.37 million tons after a complaint by Brazil, Australia and Thailand. The commission on Nov. 5, 2009, raised the volume of sugar eligible for export in the current season to 1.35 million tons from 650,000 tons in response to rising production. Brazil’s Unica sugar industry association didn’t immediately respond to e-mails from Bloomberg News seeking comment.
The EU will also lift the duty of 98 euros a ton on most-favored-nation imports of raw cane sugar from Dec. 1 through next August, the commission said.
“High world market prices for sugar currently make the cost of these imports prohibitive, which risks disrupting supplies on the European sugar market,” the commission said. “In this kind of situation, the commission is empowered to act.”
Coffee, Cocoa
Robusta coffee for January delivery fell in London for the third day, declining $51, or 2.6 percent, to $1,880 a ton on NYSE Liffe. Arabica coffee for December delivery dropped 2.6 percent to $2.041 a pound on ICE.
Cocoa for December delivery fell 22 pounds, or 1.2 percent, to 1,824 pounds ($2,937) a ton in London. The chocolate ingredient for March delivery declined $46, or 1.6 percent, to $2,820 a ton in New York.
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