Sugar Prices Projected to Rise Because of El Nino
New York — After four bitter years, sugar mills can look forward to sweeter prospects in 2016.
Prices have rebounded 52 percent since reaching a seven-year low in August. Raw-sugar futures traded in New York are heading for a 6 percent gain for the year, their first annual advance since 2010. The market has finally swung to a supply deficit after years of surpluses. And the commodity will keep rising through the first quarter of next year, according to the average of 18 traders and analysts surveyed by Bloomberg News.
While strong Asian demand is helping, the revival in sugar’s fortunes can be attributed largely to one factor: El Nino. The weather pattern has cut the sucrose content in the sugar cane grown in Brazil, the biggest supplier, as well as yields in India and Thailand.
Prices may rise as high as 16.3 cents by the end of the first quarter, according to the average estimate. Three of those polled expect prices to fall by March 31 while the rest expect the sweetener to rally further.
Global output will fall 4.3 percent to 178.9 million metric tons in the 2015-16 season, which runs from October to September in most countries, trailing demand by as much as 8.2 million tons, according to trader Czarnikow Group Ltd. A shortfall is expected for the season after that, according to researcher Platts Kingsman SA and the London-based International Sugar Organization. The last time the sugar market had two straight deficits was in 2010.