Sugar Is Supported by Mexico, India Flows

(Bloomberg) – Slow sugar exports from India, the world’s second-largest producer, and “disappointing” Mexican output are supporting prices, Morgan Stanley said.

Raw sugar has gained 6.9 percent in New York trading this year. A drought in Mexico has reduced the crop to 5.1 million metric tons from a previous forecast of 5.3 million tons, an industry committee said Feb. 10. The pace of exports from India has been slow, Morgan Stanley said. The country has so far allowed 2 million tons of sugar shipments.

“With disappointing production in Mexico and Indian exports slow to materialize, the large 2011-12 global production surplus may take some time to translate into a market-pressuring trade surplus,” Hussein Allidina, head of commodities research at the bank in New York, said in a report e-mailed today.

Sugar supplies are set to outpace demand by 7.7 million tons in the current 2011-12 season begun in October, the bank said. Raw sweetener may average 22 cents a pound in the period and 19 cents in 2012-13, according to Morgan Stanley. Raw sugar for May delivery slipped 0.2 percent to 24.91 cents a pound by 9:18 a.m. London time on ICE Futures U.S. in New York.

“With Northern Hemisphere supply increasing and some muted optimism growing over new-crop Brazilian production, we remain bearish on sugar through the balance of the year,” Allidina said.

Morgan Stanley also is “bearish” on the outlook for coffee prices, according to the report. The bank predicted increased production in Brazil and Vietnam, the two biggest global growers.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.