Commodity Blog

Posts Tagged ‘deficit’

Sugar futures gained for the third time in four sessions as traders increased buying to profit from growing supply deficit. Speculators were interested mostly in remaining in the long positions. Unfavorable weather conditions cut crops in Brazil and India increasing a global deficit. March futures for raw-sugar delivery increased $0.0046 (1.7 percent) to $0.2723 per pound as of 9:57 on ICE.

Orange-juice prices dropped to the week low after report that citrus harvest won’t be damaged by a cold weather. Possibility for some frosts remains but citrus harvest will be mostly untouched by a harsh weather. Orange-juice previously rose as hedge funds and other speculators were buying on concern that frosts will harm the fruits. March futures for orange-juice delivery fell $0.0275 (2 percent) to $1.379 per pound by 12:06 on ICE Futures U.S. in New York.

Sugar rallied in 2009 amid tight supplies, becoming the top performing commodity in the past six months. Adverse weather conditions damaged crops in Brazil and India, the two largest producers in the world, causing sugar prices to double this year. And how the commodity is going to perform in 2010?

Fundamentals can be considered bullish for the sweetener. Investment funds, limited production in India and a weak dollar are major supporting factors for sugar prices. The commodity also helped by demand for ethanol from Brazil’s flex fuel car fleet.

Global supplies of sugar will remain low for the first half of 2010. The world is using more sweetener than it is producing, causing a deficit for two consecutive years. The global sugar supply deficit is estimated as much as 13.5 million metric tons in the 2009–2010 season. There is some pending dryness in regions including India and Australia, curbing the commodity productions in these countries. On the other side, a favorable weather conditions are expected in Brazil’s Center-South, where increasing production may start to ease the current global deficit.

Beet growers in France and Germany, the two largest producers in the Europe, expect the greatest harvest since 2006. But EU regulations state that farmers may produce no more than 13.3 million metric tons of sugar for food for the domestic market, and surplus beet is considered out-of-quota and turned into export sugar or products such as ethanol. For the foreseeable future the European Commission is not going to authorize the export of out-of-quota sugar in excess of the fixed quantitative limit. Beet harvest of French growers is highest in 50 years, adding to this year’s EU oversupply of 550,000 tons. In case European growers will convince Commission to loose regulation the commodity deficit can be significantly reduce by European sugar.

Considering all factors, the outlook for sugar is rather optimistic. Most analysts agree that next target price for the commodity should be about $0.30. Yet some analysts argue that price as low as $0.13 more realistic. They point that such factors as possibility that mills will produce more sweetener than previously predicted and probability for unloading of funds positions in case if sugar prices will fall may put downward pressure on sugar. Even considering this factors its price is not likely to fall below $0.10. As always caution is advised when dealing with commodities.

Sugar went above the 3-year high level on ICE Futures in New York today. The shortfall of this commodity in India (which is the world leading consumer of sugar) and the elevated global level of deficit spur speculations among the traders that the sugar will continue rising in the world. Analysts believe that the global hedge funds will increase their positions in sugar on deficit expectations. October delivery sugar futures rose to $0.1847/pound on ICE as of 11:11 today — that’s 0.2 percent compared to the Friday’s close level.

The platinum is expected to grow back to $1,500 level per ounce during next two years, according to some commodity analysts. The gain in demand conjoined with the decline of the supply from the South African mines can lead to a slow recovery of this industrial and precious metal. Platinum immediate delivery contracts rose to $1,199.75 per ounce (or 1 percent) during today’s trading session at SICOM as of 11:30.