Sugar traders are bearish for a seventh consecutive week, the longest stretch since at least 2007, on prospects for the first supply glut in four years.
Sixteen of 22 analysts expect raw-sugar prices to decline next week and one was neutral, according to Bloomberg’s weekly sentiment survey that began in April 2007. Global production will exceed demand by 10 million metric tons in the 12 months ending in September, equal to about a year of US consumption, according to Singapore-based Olam International Ltd, which trades and processes commodities in 65 countries.
Prices that surged to a 30-year high in February last year spurred farmers to plant more cane and beet, expanding global production to a record this season. Futures traded in New York slumped 9.9 per cent in the past three weeks on mounting concern about another glut next season. Thailand, the world’s second- biggest exporter, may ship the most supply ever this year, the country’s Office of the Cane & Sugar Board said on April 11.
“We have a surplus this year and it looks like we will have another one next year and that is more bearish than we initially thought,” said John Stansfield, a senior analyst at Olam in London. “The last time the glut for two consecutive years was so big, prices were significantly lower,” he added.
Sugar’s retreat in the past three weeks to 23.08 cents a pound on ICE Futures US means it’s little changed this year and left futures 36 per cent lower than the three-decade high of 36.08 cents reached in 2011. Prices averaged 11.16 cents from October 2006 to September 2008, the last time there was two consecutive annual supply gluts. Production costs have risen since then, setting a higher floor for prices, Stansfield said.
The Standard & Poor’s GSCI gauge of 24 commodities rose 5.9 per cent this year compared with an 8.1 per cent increase in the MSCI All-Country World Index (MXWD) of equities. Treasuries lost 0.4 per cent, a Bank of America Corp index shows.
Global production will advance 4.2 per cent to 168.2 million tons this year, compared with a 2.1 per cent gain in consumption to 160 million tonnes, the US Department of Agriculture estimates. Olam anticipates a surplus of seven million tonnes in the next season. The 10 million-tonnes surplus for 2011-12 would be the first in four years and is up from a February forecast of nine million tonnes, Stansfield said.
Production in India, the second-biggest producer after Brazil, climbed 13 per cent to 23.2 million tonnes in the six months ended March 31, the Indian Sugar Mills Association said April 3. Thai shipments may rise 20 per cent to eight million tonnes in 2012, the Office of the Cane & Sugar Board’s Secretary General Prasert Tapaneeyangkul said in an interview.
Hedge funds and other speculators cut their bets on higher prices by 12 per cent in the week ended April 3 and now hold 118,339 US futures and options, data from the Commodity Futures Trading Commission show. The net-long position was 143,577 contracts on Februray 28, the most since August.
Production in Brazil, the world’s biggest grower, was damaged last year by dry weather and frost, driving prices up 56 percent from May to July. The center south of Brazil, which accounts for about 90 percent of the country’s production, was forecast in March last year to have record cane production of 568.5 million tons by industry group Unica. Output was actually 493.3 million tons. Unica yesterday forecast this year’s harvest in the center south at 509 million tons.
Sugar for May delivery on ICE Futures U.S. is trading at a 3.3 percent premium to the July contract, compared with as little as 1 percent three months ago, an indication that traders are still concerned about near-term supply.
Sugar consumption rose every year since 1994, USDA data show. Demand will be a record 167.8 million tons this season, according to the International Sugar Organization, whose members include 86 countries. Declining prices and economic growth will drive buying, said Leonardo Bichara Rocha, a senior economist at the ISO in London. The International Monetary Fund anticipates a 3.3 percent expansion in the global economy this year.
Prices will average 22 cents this quarter and the next and 21 cents in the final three months of the year, 9 percent less than now, Deutsche Bank AG estimates. That compares with a five- year average of 18.6 cents, data compiled by Bloomberg show.
In other commodities, 19 of 26 traders and analysts surveyed by Bloomberg expect gold to gain next week. Futures on the Comex in New York increased 6.4 percent to $1,667.50 an ounce this year, set for a 12th consecutive annual advance.
Twelve of 28 traders and analysts surveyed by Bloomberg expect copper to gain next week and the same amount predicted a drop. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, rose 5.1 percent to $7,990 a ton this year.
Thirteen of 30 people surveyed anticipate lower corn prices next week and five were neutral, while 17 of 31 said soybeans will slide. Corn slipped 4.3 percent to $6.185 a bushel this year as soybeans climbed 13 percent to $13.655 a bushel.
The S&P GSCI gauge of commodities fell to a two-month low this week after a Labor Department report showed U.S. employers added the fewest jobs in five months in March and on concern that Europe’s debt crisis may deepen. Chinese Premier Wen Jiabao cut the nation’s economic growth target to 7.5 percent last month, the lowest since 2004.
“Chinese indicators continue to point towards a continued slowdown, even though the soft landing still looks like the most probable alternative,” said Filip Petersson, an analyst at SEB AB in Stockholm. “There could be some way left to fall.”