Sugar futures are expected to top recent three-year highs by the end of 2009 on strong import demand from India, the median forecasts in a mid-year Reuters poll of 13 analysts showed on Monday.
The result revealed a far more bullish sugar market scenario than a similar survey taken in January, with dealers taking stock of substantial requirements for India, the world's top consumer, after a dismal domestic crop.
ICE front month raw sugar futures SBc1 are expected to rise to 19 cents per lb by the end of 2009, and to range around 18 cents in 2010, compared with 11.81 cents per lb touched on the last trading day of 2008, according to median forecasts.
Benchmark raw sugar touched a three-year high of 18.09 cents a lb on June 30.
"The tightness of the trade balance may grow taking into account a likely reduction in sugar export availability in Brazil in the second half of 2010 and high import demand by India," said Sergey Gudoshnikov, a senior economist with the International Sugar Organization (ISO).
LIFFE front month white sugar futures LSUc1 are seen rising to $493.75 per tonne by the end of 2009, and to range around $460 in 2010, against $318 at the end of 2008, the median forecasts showed.
[For Graphic of price poll forecasts, click on [http://here]
The global sugar deficit is forecast to fall to a median 4.2 million tonnes in 2009/10 from a median deficit of 8.8 million tonnes in 2008/09.
In January, the Reuters sugar poll predicted a median world sugar deficit of 5 million tonnes in 2009/10, against a median deficit of 3.75 million tonnes in 2008/09.
SUGAR MARKET OUTLOOK TIGHTENS
The January poll gave median forecasts that ICE front month raw sugar futures would stand at 14 cents per lb by the end of 2009, and that LIFFE front month white sugar futures would stand at $360 per tonne -- far less bullish than the latest poll.
On Monday, IntercontinentalExchange October raw sugar SBV9 futures were down 0.06 cent at 17.21 cents per lb.
LIFFE August LSUQ9 white sugar futures were down $2.60 at $439.40 per tonne.
According to the Reuters mid-year sugar poll, global sugar output is expected to stand at a median of 157.7 million tonnes in 2009/10, against a median of 151.2 million tonnes in 2008/09.
Consumption in 2009/10 is predicted to stand at a median 163 million tonnes, up from 160.75 million in 2008/09, and most analysts said stocks were likely to fall as demand rose to 2010.
Analysts said India's sugar import requirements would be key to determining prices, as the country has swung to a net importer from net exporter after harvesting a poor crop.
With sugar prices standing at near three-year peaks, growers are expected to increase sugar plantings, contributing to a narrowing of the global deficit in 2009/2010, analysts said.
"We continue to optimistically assume a 20 percent plus rebound in (Indian) production on the back of higher plantings and yields, though the faltering monsoon introduces a greater degree of uncertainty," Morgan Stanley said in a research note.
"The Brazilian harvest/crush is off to a strong start this year, but yields are average, and crystalisation capacity will continue to constrain sugar production."
INDIA, MEXICO, RUSSIA DRIVERS
India, Mexico and Russia will be the key drivers in terms of sugar demand, while Brazil, the world's top sugar exporter, will be the key focus on the supply side, said Praful Vithalani, analyst with Jagjivan Keshavaji and Co in India.
He forecast a recovery in production from Asia, notably India, Pakistan, China, the Philippines and Thailand, but he saw a drop in output in Brazil in 2010 due to the negative impact of the credit crunch on Brazilian milling capacity.
A key uncertainty in Brazil would be the percentage of cane allocated to make ethanol biofuel and sugar, which would depend in part on trends in crude oil prices.
One senior analyst, who asked not to be identified, said U.S. and Mexican sugar requirements could drive sugar higher.
"For the first time in many years the global sugar market may be driven by developments in the North American market," he said.
"Both countries are running out of sugar due to poor crops. In the case of Mexico they have exported very aggressively to the U.S. and now need to import refined sugar to meet industrial user demand before the next harvest starts in December."
Source : Reuters India