LONDON — Raw sugar futures are expected to rise a further 3% by the end of the year boosted by a tightening in supplies, a Reuters poll of 12 traders and analysts showed on Friday.
Prices were seen ending 2020 at 15 cents per lb, up 3% from Thursday’s close and 12% above levels at the end of 2019, according to the median forecast.
The poll consensus was for a global deficit of 1.15 million tonnes in the 2020/21 season following a deficit of 6.72 million in the current season.
The smaller deficit was driven by an expected rise in Indian production with a median forecast for 2020/21 of 31.10 million tonnes, up from 26.55 million seen for the prior season.
Several respondents cited the extent to the recovery in India’s sugar production as a driver of prices in 2020.
Production in the Centre-South region of Brazil in 2020/21 was seen at 29.40 million tonnes, up from about 26.60 million in 2019/20.
Supplies of sugar are influenced heavily by relative prices of sugar and biofuel ethanol in Centre-South Brazil, both of which use cane as a feedstock.
The poll forecast that 36.5% of cane would be used to produce sugar although respondents noted that trends in energy markets could trigger significant shifts in production.
An all-time low of about 34.1% was allocated to sugar in the 2019/20 season.
One participant said the tightening in supplies had resulted in a premium for nearby delivery, known as a backwardation, which could encourage funds to further expand their current net long position.
Funds need to roll positions forward during the course of the year as they do not generally want to receive physical products. Rolling a long position forward when the market is in backwardation yields a profit.
Prices for white sugar were seen ending 2020 at $400 per tonne, down 2% from Thursday’s close but 11% above levels at the end of 2019 after a sharp rise this month, according to the median forecast. — Reuters