Sugar prices rebounded as some commentators revived
expectations of a boost from an early end to the Brazilian cane crushing
season, with Job Economia saying that it was "time to buy" the sweetener.
Raw sugar futures for October gained 0.6% to 15.68 cents a
pound in early deals in New York, while clawing their way back over the contract's
10-day moving average.
London white sugar for October gained 0.5% to $428.50 a tonne.
The gains - which distanced raw sugar from a six-month low
of 15.30 cents a pound reached on Monday, and white sugar from its six-month
low of $417.00 a tonne set last week – came amid questions over a gloomy
price outlook from the International Sugar Organization.
The ISO on Tuesday, foreseeing a fifth consecutive world
sugar production surplus in 2014-15, of 1.3m tonnes, said it foresaw little
prospect of a recovery in prices of the sweetener.
However, Commerzbank, saying it did "not take quite such a
rosy view of the supply prospects" forecast, "higher prices in the medium term".
The ISO estimates, for instance, include a forecast of 27.1m
tonnes for Indian production, higher than that of many other forecasters.
ED&F Man earlier this month forecast output of 25m
tonnes, as did Kingsman last month, if adding that a recovery in the monsoon,
which has shown a little improvement, could add 1m tonnes to its estimate.
'Time to buy'
Commerzbank, which foresees raw sugar prices recovering to 17
cents a pound by the end of 2014, also flagged the "noticeably dwindling
dynamism of the Brazilian sugar cane harvest".
Separately, Brazil-based consultancy Job Economia also
pointed to the drought damage to Brazilian cane, expected to lead to an early
end to the 2014-15 harvest, as a price support.
Producers in Brazil's Centre South region, responsible for
some 90% of domestic sugar output, "continue to confirm that there will be a
considerable shortfall in production", Job Economic said, even if acknowledging
that "the figures we are seeing so far are not yet showing this reality".
"We believe that when the Brazilian shortfall begins to
become apparent then prices are likely to recover.
"It is time to buy."
Headline data from Unica, the Brazilian cane industry group,
show Centre South sugar output running 6.4% higher so far in 2014-15, which for
the country starts in April, on cane volumes up 2.8%.
However, the increased cane volumes reflect another
manifestation of dry weather – a strong harvest pace – rather than a strong
crop, with yields substantially lower year on year, meaning that supplies will
run out normally than would be expected, Unica says.
Indeed, the group on Tuesday cut its forecast for the Centre
South cane crop this season by 34m tonnes to 546m tonnes.
Commerzbank added: "Sugar production in Brazil is thus also
subject to downside risks given that it is hardly likely in view of the low
prices that sugar mills will increase the proportion of sugar cane that goes
into producing sugar."