Commonwealth Bank sees sugar bounce coming
Published: 03/19/2010, 7:14:10 AM
The Commonwealth Bank of Australia says a supply shortage could soon boost benchmark sugar futures prices to as high as 25 US cents a pound, a gain of more than 30% from current levels, according to Dow Jones.
"A huge structural supply deficit will still exist" until well into the second half of 2010, and by September the stock-to-use ratio will be one of the tightest on record, softs commodities strategist Luke Mathews said in a research note.
Mathews said he expects sugar prices to average 22 cents in the second quarter of 2010 as countries such as the US, India and Indonesia may import significant amounts of sweetener. Thursday's rebound in sugar prices could have marked the start of the rally, he added.
Traders covered short positions Thursday after a recent selloff, with the May sugar contract on ICE Futures US settling up 70 points, or 3.6%, at 19.03 cents a pound. Tuesday, the May contract hit an eight-month low of 17.66 cents.
Meanwhile, good weather and a larger planted area could boost Australian cane production by 10%-13% next crop year, increasing raw sugar production by 8%-10%, he said.
Mathews' forecast was higher than a March projection by the Australian Bureau of Agricultural and Resource Economics, which estimated sugar production would rise 6.2% to 4.80 million metric tons in the crop year that begins July 1.
Around three-quarters of Australia's sugar production is exported, making it a major regional supplier.