Raw Sugar Extends Longest Slump Since August 2012 on Supply Glut

(Businessweek) – Sugar extended the longest slump in more than 15 months as processors are beginning to turn cane into sweetener in India, the world’s second-biggest producer, at a time when inventories are swelling to a record.

Mills in Uttar Pradesh, the largest cane grower in India, will start operating by Dec. 12, and output won’t be affected by the delay caused by a shutdown over a dispute on crop prices, C.B. Patodia, president of Uttar Pradesh Sugar Mills Association, said in a telephone interview yesterday. Thailand, the top shipper after Brazil, aims to increase sugar production by 10 percent to 11 million metric tons even after crushing was delayed, the Office of the Cane and Sugar Board said yesterday.

Global stockpiles will increase 0.5 percent to an all-time high of 43.379 million tons in the season ending by September for most countries, from a year earlier, as production outstrips consumption for a fourth year, the U.S. Department of Agriculture said Nov. 21. Prices are heading for a third straight annual decline, the longest slump in 21 years.

“We’re looking at production surpluses as far as the eye can see,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “If we don’t see a significant curtailment in the production, the price will keep falling.”

Raw sugar for delivery in March lost 0.9 percent to settle at 16.81 cents a pound at 2 p.m. on ICE Futures U.S. in New York, after touching 16.8 cents, the lowest for a most-active contract since Sept. 9. Prices dropped for a 10th straight session, extending the longest slide since August 2012.

“This market needs desperately to hold above 16.79 cents, otherwise it may fall as low as 15 cents by the first quarter next year,” Cordier said.

Ethanol Producer

Brazil, the largest producer of ethanol from sugarcane, may start making the biofuel from corn, after a record harvest of the grain caused domestic prices to slump below cost, Neri Geller, the agriculture policy secretary, said in a telephone interview yesterday.

That may lower demand for cane from ethanol producers, diverting some of the crop to sugar production in Brazil, also the largest producer of the sweetener, Jack Scoville, the vice president of Price Futures Group in Chicago, wrote in a report.

Brazil’s real fell today to the lowest since Sept. 3 against the dollar, increasing the incentive for growers to increase exports priced in the U.S. currency.

“With the weaker real, the sooner the Brazilians sell, the better off they are,” Cordier said.