good day will come

Commodities: Sugar On The Up
July 16 2007 - Australasian Investment Review – (AIR)

Far from the mid-year slump forecast in March and April, sugar is on the way up.
For how long, no one is prepared to say. Some analysts are saying 11 to 12 USc/lb in the next couple of month, but then other analysts were forecasting a price around 8 USc/lb for July in March.

But after rising 16 per cent from the near two year low of 8.52 US on June 5, the price is looking solid.

World supply and demand still looks daunting with more sugar (raws and whites) flooding the market, especially from India which has boosted exports significantly in the past year or so.

But the price of sugar in New York ended at 9.87 USc/lb on Friday, after touching 10.22 USc. That was the highest price for the most current contract since the end of March.

CSR, which is responsible for around 40 per cent of the Australian crop, rose 3c on Friday to $3.57.

It's more a takeover situation than a commodity rebound play with Ron Brierley's GPG group in the register with around 6 per cent or so. The company's building products business is also experiencing flat trading conditions.

So why is sugar on a rebound?

The latest reason was an apparent switch from sweetener manufacturing to ethanol production by many mills in Brazil's major producing region: the so-called centre-south region.

Around 85 per cent of Brazil's sugar cane is grown in this area and the mills have cut sweetener output by 8.7 per cent and lifted ethanol output 11 per cent in the first five months of this year, compared to the same period of 2006.

That was seen as being good news because Brazil dominates the world sugar market and can easily switch from sweetener to ethanol production, such is the size of its productive capacity and the domestic ethanol consuming sector (mostly motor vehicles). Rising world oil prices stimulates ethanol demand in Brazil.

But sugar production is still seen as exceeding consumption this year with the world surplus forecast to top nine million tonnes.