Sugar prices are expected to climb from 17.3 US cents per lb in Q2 2014 to 18.5 cents for the same quarter next year.
‘Not anticipating a large increase’
“We’ve had an upward trajectory for our prices for a long time,” Tracey Allen, commodities analyst at Rabobank told ConfectioneryNews.
“We are not anticipating a large increase in prices by any means because we still have large end stocks.”
Rabobank has forecast a sugar deficit of 2.5m MT for 2014/15, but 70m MT of end stocks from previous seasons gives the market a buffer.
However, it will be the first time the sugar market has entered deficit for five seasons and the stock to consumption ratio will hit 37.4%, the first time it has gone below the 10-year average of 38.4%.
Developing market consumption
“The consumption continues to grow at 2% per annum,” said Allen. She said this consumption came as global production was down 0.6%.
“It’s going down on an annual basis. There is some adverse weather in Brazil and outside of Brazil there have been declines in cane land in China.”
Allen said the rising consumption was coming mostly from food and drink manufacturers that are moving into developing markets.
Future deficits?
Rabobank’s ‘Commitment of Traders’ report published today shows that the big hedge funds have shifted from long positions to net short positions, suggesting that they expect prices will fall in the longer term.
Allen said it was too early to speculate if there would be deficits in future seasons that would eventually deplete end stocks.
Alternative sweeteners and cocoa hikes
Asked if sugar was coming under any pressure from competitor sweeteners, she said: “We are starting to see increasingly health conscious consumers who are switching.” She said that there had been growing interest in natural sweeteners such as xylitol but added that there was no major threat to sugar.
The slight spike in sugar prices comes as cocoa prices were up 6% last week as concerns mount over potential disruption from Ebola in West Africa. The main producing nations, Côte d’Ivoire and Ghana, have yet to report a case of the virus. Côte d’Ivoire has closed its borders with neighboring Guinea, which has been badly hit by the outbreak.