Outlook seems not so sweet for sugar sellers

Sugar, trading near a two-year low, is set to pile up in producing countries next season as a lack of demand amid a global surplus forces growers to hold back supplies, according to the brokerage Kingsman.

"Sellers will struggle to get buyers for raw sugar in the season starting October," Jonathan Kingsman, the chief executive of the researcher and broker, based in Lausanne, Switzerland, said in New Delhi. "Indonesia will be the biggest raw sugar importer in the absence of Russia and China. Prices will remain under pressure in the next six to 12 months on excessive supplies."

Futures dropped to a two-year low in New York last week after drier weather in Brazil, the world's biggest sugar producer, accelerated harvesting, while improvement in rains last month in India, the second-largest grower, improved crop prospects.

Sugar has declined 31 per cent in the past year.

Supplies will exceed demand by 8.7 million tonnes in the 2012-2013 season, below a June forecast of 9.3 million tonnes, Kingsman said on August 31. That follows a surplus of 10.1 million tonnes in the current season.

"Sugar will have to be stored on lack of demand," said Mr Kingsman, who has traded sugar for more than three decades. "Stockpiling will be at the sources, not at the destinations."

Société Générale cut its forecast for raw sugar futures in the fourth quarter by 2 US cents to an average of 21.5 cents a pound as dry weather allowed the harvest to accelerate in Brazil, analysts led by Michael Haigh, the global head of commodities research, based in New York, said in a report.

Output from Brazil's centre south region may climb to 35.8 million tonnes in the 2013-2014 crop season from 32.8 million this year, said Kleber Andrioli, an analyst at Macquarie Bank.

* Bloomberg News