x Abu Dhabi, UAETuesday 23 January 2018

Sugar hits sweet spot for stockholders

Commodity in short supply for second consecutive season.

It is a sweet time to be stocked up on sugar. The price of raw sugar has risen 52 per cent since hitting a 13-month low on May 7 as worries linger over whether adverse weather will cut sugar cane output in Brazil, China and Pakistan. Last season, a drought in Russia caused production setbacks and Thailand closed its export market until its new crop harvest for similar reasons, said Doug Whitehead, a soft-commodities analyst at Rabobank in London.

In Brazil, exports have been hit as ports faced logistical problems after bad weather. Brazil is the world's main producer of raw sugar. This is the second consecutive year the commodity has been in short supply, making it difficult for buyers to restock their inventories in the spot market. "A lot of importers that have been putting off their raw sugar imports are now having to go into the market to try and buy," said Mr Whitehead. "But it has been a really tight market for physical raw sugar at the moment."

Futures for October delivery moved 1.1 per cent higher to trade at 19.9 cents a pound in New York yesterday. Prices are likely to remain at peaks at least into the first half of next year when Indian producers export their sugar into the spot and futures market. "We expect them to stay in the 15 to 20 cent range over the next 12 months," Mr Whitehead said. Michael McDougall, a senior vice president at the US brokerage Newedge, told Bloomberg he felt the price could approach 24 cents by the end of this month.

There are no publicly traded sugar refineries in the UAE but giants such as Al Khaleej Sugar Company, based in Jebel Ali, are expected to see fatter margins. As Ramadan season demonstrates, demand for sugar is considered safe. Even if it costs a few extra dirhams, consumers want their candies, kanafas and baklavas. halsayegh@thenational.ae