Sugar traders extend longest bear streak since ‘07

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April 13 (Bloomberg) -- 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 U.S. 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 9.2 percent 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.”

Erases Gains

Sugar’s retreat in the past three weeks to 23.27 cents a pound on ICE Futures U.S. means it’s little changed this year and left futures 36 percent 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 6 percent this year compared with an 8.1 percent increase in the MSCI All-Country World Index of equities. Treasuries lost 0.4 percent, a Bank of America Corp. index shows.

Global production will advance 4.2 percent to 168.2 million tons this year, compared with a 2.1 percent gain in consumption to 160 million tons, the U.S. Department of Agriculture estimates. Olam anticipates a surplus of 7 million tons in the next season. The 10 million-ton surplus for 2011-12 would be the first in four years and is up from a February forecast of 9 million tons, Stansfield said.

Production in India, the second-biggest producer after Brazil, climbed 13 percent to 23.2 million tons in the six months ended March 31, the Indian Sugar Mills Association said April 3. Thai shipments may rise 20 percent to 8 million tons in 2012, the Office of the Cane & Sugar Board’s Secretary General Prasert Tapaneeyangkul said in an interview.

Trading Commission

Hedge funds and other speculators cut their bets on higher prices by 12 percent in the week ended April 3 and now hold 118,339 U.S. futures and options, data from the Commodity Futures Trading Commission show. The net-long position was 143,577 contracts on Feb. 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 2.4 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.

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