Sugar market: what will be the prices?

The following factors will make sugar decline in price: good weather conditions in Brazil, favoring the process of harvesting, and the production of sugar in India against the background of the insufficient data on the global demand for sugar. In March the Indian government allocated 1.68M tons of sugar for export.

Last month the allocated export volume was 1.62M tons of sugar. 350 000 tons of it was left unsold and may be sold in the near future. According to experts’ forecasts, this year the net volume of sugar production in India will reache 24.5m tons. Last year the production volume was only 19M tons. Moreover, Japan is expected to lower the sugar export in the short run. It is the world’s 8th largest importer of sugar (1.5M tons a year).

There is a factor that may support the prices. It is the sugar deficit in the European Union, which has already turned into some “sugar panic”. In particular, in Poland, according to some major retailer networks, over the last month they have sold 4 times as much sugar as in the previous month. The current deficit of sugar in the EU is about 4M tons (300K tons – in Poland). Some media say that it is the result of the reform that took place in 2006. In 2005 the EU produced 21M tons of sugar a year, consuming 17.5M tons of the net volume. The surplus was exported to the developing countries. But neither European taxpayers nor the WTO liked such a scheme. So the EU producers of sugar were forced to restrain the production as the authorities promised to import sugar from Brazil, Australia and Thailand if necessary. As a result, the net production volume in the EU declined down to 13.5M tons of sugar in 2010. Moreover, it appeared that they had no opportunity to import sugar as, firstly, numerous sugarcane crops around the world had been damaged by bad weather conditions. Secondly, numerous sugar-producing countries usually spend much of their sugar crops to produce bio-fuel (Brazil, for example).

Numerous investment funds have a great impact on sugar prices as they constantly looking for the products to make money (It should be noted that in January when numerous commodity markets saw some stock-jobbing many invest funds turned to these markets from gold, investing more than $5B in them). At the moment sugar looks fairly attractive in terms of investments. Sugar can be stored for a long time and its quality isn’t harmed when it is transported.

The mentioned EU reform and the demand for sugar shown by bio-fuel producers make sugar even more costly. Under the crisis when the US and China are printing new paper money invest funds are willingly investing the cheap money in commodities. After the revolution in Libya broke out sugar lost in value 20% as the investors wanted to make big money from trading crude oil. If the situation in the Middle East is aggravated sugar will become cheaper. If the chain of revolutions subsides the sugar will keep growing in price. According to the analysts for the Department of Commodity Trading, Masterforex-V Academy, the positive data on the production volume in Brazil and India will have a short-term impact on the market. Anyway, the market of sugar is very unlikely to collapse.