Sugar Prices To Remain Lower On Weaker Demand, And Currencies

Michael Teague |

The International Sugar Organization said on Monday that global prices could remain lower for the foreseeable future, as an oversupply and weakening currencies in the world’s top-producing countries continue to create significant downward pressure.

Brazil and India are currently the number one and two countries for output, but the depreciation of the real and the rupee against the dollar have so far buffered producers from the worst effects of decreasing prices of the commodity. But sugar has dropped some 40 percent since the three-decade high it reached back in 2011, as exporters have dramatically increased their output.

Indeed, major producers such as Australia have produced significantly more sugar than in years past, and India could up output by three times in 2014. The Asian continent’s most struggling currency is attracting demand for Indian sugar. The rupee is down 14 percent against the dollar, and coupled with Brazil’s real, similarly down 13 percent in 2013, prices are expected to stay lower. India is expected to ship over 1 million tons in 2013-2014 alone. A similar situation can be seen in another major exporter, Thailand, where its own currency issues are expected to lead directly to record sugar production next year.

Sugar for delivery in October finished the day at $0.17 cents per pound, and futures are off by 16 percent so far this year. While countries with anemic currencies are upping production to meet increased demand, however, global production is expected to correct somewhat in the near future. The expected 180.8 million tons, or 1.2 percent drop on the prior year, will be the first reduction since 2008-2009, while demand is expected to grow over 2 percent to 176.3 million tons.

[Image: Indian Sugar Cane, courtesy of Wikimedia Commons]

 

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