Sugar glut extending to longest in more than decade

Bullish Bets

Nestle, the maker of Smarties and Aero candy, expects to see “a little bit of lighter pressure” from raw materials in the second half, Chief Executive Officer Paul Bulcke told analysts on a conference call last month. Shares of the Vevey, Switzerland-based company rose 15 percent to 61.95 francs this year and will trade at 62.43 francs in 12 months, according to the consensus of 30 analyst estimates compiled by Bloomberg.

Hedge funds pared bullish bets on sugar by 48 percent since the start of March, U.S. Commodity Futures Trading Commission data show. They held a net 75,479 contracts in the week ended Oct. 9, compared with a five-year average of about 114,000 contracts. Open interest in raw-sugar futures contracted about 12 percent since mid-June, valuing the ICE Futures U.S. market at about $15.4 billion, bourse data compiled by Bloomberg show.

Australia, the third-biggest shipper, may produce 4.5 million tons in the year started July 1, up from 3.7 million tons a year earlier, according to the Australian government’s forecasting unit. Farmers planted more cane and hot, dry weather raised yields.

Pakistan may export 1 million tons this season after better-than-average rainfall boosted crops, according to the country’s Sugar Mills Association. That compares with sales of only 137,000 tons this year since January, the group says.

“There are mounting expectations that supply could outstrip consumption in the coming quarters,” said Michael Creed, an agribusiness economist at National Australia Bank Ltd. in Melbourne. “Inventories are set to increase.”

Bloomberg News

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