sugar plunges after eu announcement of excess supp

Sugar Plunges After EU Announcement of Excess Supply Export

By Marianne Stigset and Warren Giles

Dec. 7 (Bloomberg) -- Sugar fell for a second day in London after the European Union, world's second-biggest sugar exporter, said it would export some of its excess stock and funds began selling in both London and New York.

``The current market situation presents a good opportunity'' to open the stocks for sale, the European Commission said in a statement from Brussels after a meeting of government experts today. The EU now ``needs to make use of its export rights'' allowed at the World Trade Organization.

The 25-nation EU is reducing its exports after Brazil, the largest exporter, won a WTO dispute last year that stops growers from sending abroad their surplus production. European Agriculture Commissioner Mariann Fischer Boel said last month that too few producers have given up their quotas since the industry was overhauled in July.

White, or refined, sugar futures for March delivery dropped $10.60, or 2.9 percent, to $350.60 a metric ton on London's Euronext.liffe. Earlier, it dropped as much as 3.6 percent, the biggest decline compared with closing prices since Oct. 20. Prices have fallen 29 percent since this year's high of $497 a metric ton on May 12.

The EU announcement ``is partly the reason why the market is down, but there is also hardly any interest on the buying side and the funds are selling a couple of thousands lots,'' said Marie Ensignia, a senior sugar and coffee trader with ADM Investor Services International Ltd. in London.

Guaranteed Prices Cut

European sugar growers have applied to scale back production by 700,000 metric tons in 2007, short of the forecast cuts of 5 million tons. The growing European sugar supply prompted Theo Spettmann, the chief executive officer of Suedzucker AG, the world's biggest processor, to say on Nov. 21 that the EU market may ``collapse'' unless more exports are allowed.

On the New York Board of Trade sugar futures for March delivery fell 0.29 cent, or 2.5 percent, to 11.2 cents a pound at 11:20 a.m. local time. Prices have declined 24 percent this year.

``If you look at the white premium, it has remained steady at $102 per ton, meaning London is falling at the same speed as New York,'' Michael McDougall, a senior vice president at Fimat USA LLC in New York, said by e-mail, adding that the funds there had sold ``an estimated 5,000 lots so far.''

The EU agreed to chop the guaranteed price it pays for the sweetener by 36 percent since July and is aiming to end net sugar exports within a decade. Under its WTO commitments, the EU is allowed to export 1.374 million tons of subsidized sugar, the commission says.

The EU exports would add to the oversupply on the world market. Global sugar production is forecast to exceed demand by 5.1 million tons in the year to September, spurred by the high prices in 2005 that prompted cane growers to increase their planted areas, C. Czarnikow Sugar Ltd., the world's largest sugar broker, said in a report last month.

``There's more supply than demand right now, which is making for a depressed market,'' Ensignia said.