Sugar Prices Will Be Supported By A Smaller

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Bank of America Global Research stated in a Monday note that the benchmark raw sugar price in New York is expected to remain firm and may even go up due to tight global supply of sweetener.

The bank's analysts said that cane crushing was below expectations in Brazil, which is the world's biggest sugar producer and exporter "because of the dry weather conditions and recent wildfires" in Sao Paulo.

The bank also said that wildfires could have an impact on the yields in the Brazilian cane renewal areas, and also the inter-harvest periods.

BofA estimates that the global balance of sugar will be a modest surplus of 650,000 tons, resulting in a ratio of stocks to use of 54.1%. These fundamentals, it said, should push prices up to 21-22 cents a pound.

On Monday, the sugar price on ICE was 18.83 cents a pound. This is a new low for two weeks.

The bank stated that if India proceeds with its plans to divert three or four million tons of sugar into ethanol production, global supply would shift from a surplus of about 3 million tons to a deficit.

BofA expects the ethanol price to increase in Brazil due to the smaller cane harvest. The bank recommends that sugar and ethanol producers Adecoagro Raizen and Sao Martinho be purchased based on these fundamentals. (Reporting by Marcelo Teixeira; Editing by Sandra Maler)

(source: Reuters)

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