Sugar supplies will remain limited until the 2012-13 harvest begins in top producer Brazil, broker FCStone do Brasil said citing futures traded in New York. The rise in sugar price helped push the FAO Food Price Index to 234 points in June, which is 39% higher than a year ago.
Raw sugar for delivery in March 2012 more than tripled its premium to the May contract in a month with the wider gap indicating that a projected surplus will only come about with the start of the next harvest in Brazil Bruno Zaneti, a consultant at FCStone, said in an e-mailed quoted by Bloomberg.
“The sugar harvest in the Northern Hemisphere will have just started in the fourth quarter and, with Brazilian production dropping sharply, we will see tight supplies until the start of the next harvest” he said, referring to the current Brazilian crop.
“This is being reflected in the spread between March and May 2012, with the May contract capped by the new crop” in Brazil.
Brazil usually starts harvesting its sugar-cane crop in April, while the Northern Hemisphere harvest often begins in October. Macquarie Group Ltd. cited reduced Brazilian output in the current season when the bank this month cut its forecast for the sugar market’s surplus in the 2011-12 season to 7 million metric tons from 8.3 million tons.
Raw sugar for March 2012 delivery was trading 1.41 cents a pound above the May contract in the Futures US in New York, compared with 0.44 cent a month ago.
Brazil’s cane crop will fall this season for the first time in 10 years to 535 million metric tons for the current season, broker C. Czarnikow Sugar Futures Ltd. said July 6. Industry group Unica is expected to lower its 568.5 million-ton estimate this month.
Earlier this month it was reported that the FAO Sugar Price Index rose 14% from May to June, reaching 359 points. Production in Brazil, “the world's biggest sugar producer, is forecast to fall below last year's level”, said FAO.