After four bitter years, sugar mills can look forward to sweeter prospects in 2016.
Prices have rebounded 53% since reaching a seven- year low in August. Raw-sugar futures traded in New York are heading for a 4.3% 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.
“The fundamental story supports prices at higher levels,” said Donald Selkin, chief market strategist at National Securities Corp. in New York, who helps manage about $3 billion of investments including commodities. “The market has anticipated the deficit and demand is increasing in developing countries.”
Raw-sugar for March delivery closed Wednesday up 2.5% at 15.5 cents a pound on ICE Futures in New York. The futures price 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 31 March while the rest expect the sweetener to rally further.
Source: www.livemint.com