Sugar prices go higher; but no EU intervention needed, says Rabobank

By Jane Byrne

- Last updated on GMT

Related tags European union

Global sugar prices have reacted strongly to the news of lower Brazilian output but the upward movement does not trigger the need for any additional EU intervention on the commodity 'just yet', claims Rabobank.

Brazilian industry body Unica reported yesterday that production in the country’s largest sugar growing area may drop by as much as 1 million metrics in the current season compared with a year earlier.

Keith Flury, commodities analyst at Rabobank, told this publication that with EU prices still above international markets and domestic sugar crop expectations, additional European Commission correction measures would not be necessary "for the moment."

The EU market will have the benefit of better domestic supply as sugar crop production levels in the EU and FSU (Former Soviet Union) countries “look good​,” he continued, adding that sugar supply from India and Thailand in the coming season will likely expand from the current marketing year.

According to Flury, Brussels was taught a valuable lesson this season about the supply of sugar within the bloc, with intervention seeing thousands of tonnes of sugar being released onto the EU market to stave off under-supply.

In a report from sugar broker Czarnikow last month, analysts there said that the 2011/12 cycle sugar production is expected to exceed consumption and the surplus could potentially create more of a buyers market for food manufacturers.

The sharp rise in global production is expected as producers respond to high sugar prices, according to the traders.

And Peter de Klerk, Czarnikow senior analyst, told this publication today that despite predictions of lower Brazilian output, he still expected the global sugar balance sheet to be in surplus for the next marketing year. "But after three years of stock draw downs, the balance sheet remains fragile,"​ he added.

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