Global Sugar Stockpiles at Risk After Price Surge

A surge in sugar prices is driving buyers to delay international purchases and tap local inventories, further pressuring global stockpiles that stand at the lowest in a decade.

(Bloomberg) — A surge in sugar prices is driving buyers to delay international purchases and tap local inventories, further pressuring global stockpiles that stand at the lowest in a decade.

Importers are cutting orders after raw sugar futures rose to the highest in more than ten years in New York. Technical market indicators are also flashing signs of market tightness, with an inverted futures curve showing a premium to get sugar now.

Buyers in Africa and the Middle East are postponing orders and will have to draw from inventories as a result of the inverted curve, said Guilherme Correa, a commercial manager at Tereos SCA.

Futures soared in the last month as India, the world’s second-largest exporter, warned it may curtail additional shipments, while Thai millers said production may miss forecasts. Meanwhile, transportation bottlenecks may limit deliveries from Brazil. Rising oil prices have also raised fears that sugar cane may be diverted to ethanol production.

With rains having resumed in Brazil, the world’s largest exporter is set to harvest one of its biggest crops on record. However, the Brazilian transportation system is overwhelmed by a record soybean crop that threatens to create logjams for sugar deliveries, said University of Sao Paulo researcher Fernando Bastiani.

Truck rates for moving sugar out of the biggest producing area are higher now at the start of the season than in the peak of the previous harvest, he said.

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