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The World Sugar Market
WORLD MARKET
The New York No. 11 price, basis October, moved around quite considerably in the latter weeks of the contract touching US Cents 14/lb on occasion. A stronger dollar and weaker oil prices have since put pressure on commodity markets and the No. 11 price is now 12.2 cents/lb (March 2009 delivery). The London No. 5 white sugar price (basis October) broke the US$ 400/t barrier in late August and then reached a 21 month high. The price (basis December) is now around US$ 380/t and the white premium remains at a high level of US$ 110/t.
The supply:demand balance is changing and Czarnikow is forecasting a global deficit at 3.3 million tonnes in the year to 30 September 2009, after a surplus of 9.4 Mt in 2007/08. The main reasons are a major downturn in India and production decline in the EU combined with a higher proportion of Brazilian cane destined for ethanol. While market fundamentals are shifting and signs point towards good price prospects in the future (some observers are arguing that raw sugar prices could reach 17-19 cents/lb) there are several unknown variables, notably the size of future Brazilian crops, the proportion diverted to ethanol, the oil price, currency movements and speculator interest.
EU
Under the reform agenda a significant price cut will take effect from 1 October with the reference prices for raw sugar falling to € 434/t. The final round of cuts will take effect from October 2009 at which point the full 36% price cut (to € 404/t for whites and € 335/t for raws) will have taken effect. There is currently much speculation as to where EU white sugar market prices will settle in relation to the reference price (ie the extent of the market premium) once the reform measures are implemented.
WTO OHA ROUND
Key players in the negotiations which stalled in Geneva issued positive statements about reviving the trade talks as soon as possible to address unresolved issues from the July Ministerial meeting. They are due to reconvene in mid September. The US Presidential elections in November are seen by many as a deadline by which a Doha deal has to be struck. Otherwise there is the risk of deferral for a considerable time. However the major protagonists in the safeguard issue have all stated that talks will only succeed if there is a serious appetite for compromise.
The World Sugar Market