Sugar traders are the most bullish in two months on speculation rain may again disrupt the harvest in Brazil, the world’s largest producer, just as output and exports from second-ranking India decline.
Twelve of 18 traders surveyed by Bloomberg expect raw sugar to gain next week and three were bearish, the most bullish since July 6. The commodity has gained 6.9 percent this week to 20.72 cents a pound on ICE Futures U.S. in New York.
Brazil’s main growing area is set to get rain again as of Sept. 20, according to weather forecaster Somar Meteorologia in Sao Paulo. Prices climbed 8.2 percent in June and 7.8 percent in July after rainfall delayed its harvest and shipments.
Sugar production in India, the biggest consumer, may be 23.5 million metric tons in the season starting in October because of dry weather, according to ED&F Man Commodities India Pvt. That is less than the 24 million tons estimated by the country’s Sugar Mills Association and the 26 million tons produced in 2011-12. India won’t export sugar in the fourth quarter, John Stansfield, a senior analyst at Vitol Services Ltd., said at a conference in New Delhi this week.
“There are still some weather issues both in Brazil and India and sugar is clearly undervalued right now,” Michael McDougall, head of the Brazil desk at broker Newedge Group in New York, said by e-mail yesterday. “Millers in Brazil will probably leave more cane in the fields if rain returns, which will tighten availability for the rest of this year.”
Sugar has fallen 11 percent this year as supplies were forecast to outpace demand by 5.9 million tons in 2012-13, a third consecutive surplus, the International Sugar Organization in London estimated last month. The commodity is the fourth worst performer in the Standard & Poor’s GSCI index of 24 raw materials, beating coffee, cotton and lean hogs.
Sugar’s drop accelerated last month as dry weather in Brazil helped boost production. Sugar-cane processing in the center south, the country’s main growing region, climbed 14 percent to a record 46.5 million tons in the second half of August, according to data from industry group Unica. Cane processing for the season through Aug. 31 fell 9.4 percent to 307.6 million tons, Unica estimates show.
“This year’s crop is still behind last year’s and if it rains in October, millers won’t be able to process all of the cane,” Bruno Lima, a risk consultant a INTL FCStone Inc. in Campinas, Brazil, said by phone yesterday. “The crop in India, which is already forecast to be smaller, may start late to allow for the cane to mature after a poor monsoon.”