Sugar prices continue to soar as forecasts for a market deficit continue to deepen amid changing market fundamentals.
The commodity has been trading around its highest price point since 2013 this week. Sugar prices are up about 25 percent so far this year.
While expectations for a sugar supply deficit have been circulating for some time, the supply situation continues to deteriorate. The supply shortage is forecast due to a decline in production across Asia after drought conditions impacted the sugar crops, while even a bumper crop from top producer Brazil is not expected to compensate for the shortfall. Part of the reason is that enticing fuel margins mean the company is using more sugar cane to produce ethanol while maintaining its raw sugar output. At the same time, there is a gridlock right now in Brazilian ports.
This season there is expected to be a 5.3 million-ton deficit of sugar, and next season (which starts in October) the deficit will be 5.6 million tons.
Source: www.economiccalendar.com