Brazil’s Sugar Lull May Drive Prices, Czarnikow Says

Brazil’s “off-crop” sugar supplies are set to drive prices in the first part of 2011, C. Czarnikow Sugar Futures Ltd. said.Raw sugar prices have jumped 22 percent this year as port delays and excessive rain curbed supplies from Brazil, the world’s largest producer.

The rest of the 2010-11 season that ends in September has a “deteriorating outlook,” Czarnikow analyst Toby Cohen wrote in a report today.

Sugar buyers may be overestimating the sugar industry’s ability to meet their sweetener needs as Brazil enters into a period of reduced exports in the “off-crop” season for the Central South harvest, which usually starts in April and ends this month, according to Czarnikow.

Raw sugar for March delivery fell 0.06 cent, or 0.2 percent, to 32.9 cents a pound by 11:47 a.m. in London on ICE Futures U.S. in New York.

Port delays from Brazil in September were a “warning of the risks that importers are now facing given the low stock environment and supply side dominance of Brazil,” Czarnikow analyst Toby Cohen wrote in the report. Buyers are still showing a “degree of confidence in supply behavior which we think discounts the risks inherent to today’s environment,” he wrote.

Sugar supply will fall short of demand for a third year in 2010-11, and the market has “convincingly” moved away from the trading range of 7 cents to 15 cents a pound of the 1990s and is “now moving into a new price environment, reflecting the increasingly fragile sugar balance sheet as a result of low stocks and the increasing cost of production,” Cohen wrote.

source: businessweek