Sugar prices have considerably more ground to lose, even after a drop of more than 10% in the last month, thanks to the prospect of a slump in Chinese imports, Commonwealth Bank of Australia warned.
The jump in Chinese imports to a record 4.2m tonnes in 2011-12, will go rapidly into reverse this season thanks to a sharp upturn in domestic production, leaving them at 1m tonnes.
With China's import "the primary support for prices over the past year" the impact will be to depress values even further, CBA analyst Luke Mathews said.
New York raw sugar futures will drop to an average of 17.0 cents a pound in the second quarter of 2012, and to 16.7 cents a pound in the following quarter – levels well below those that futures are factoring in.
As extra pressures on values, supply hopes look improved too, despite the prospect of Australia's sugar output not increasing quite as far as previously expected, to 4.35m tonnes, 170,000 tonnes short of the forecast by official crop bureau Abares.
In top producer, and exporter, Brazil, sugar output in the key Centre South region was now on track to meet a forecast from cane industry group Unica of 32.7m tonnes for 2012-13, after lagging earlier in the season thanks to rains which disrupted harvesting.
And Centre South output looked set to rise further next season, potentially to a record 36m tonnes, thanks to a cane crop estimated by Kingsman at 538-575m tonnes.
Meanwhile, although output in India, the second-ranked producer, will fall to 23-24.5m tonnes, in refined terms, in 2012-13 down from 26.2m tonnes last season, that is still enough to more than cover domestic needs and allow some exports.
The comments came as raw sugar futures extended their slide on Wednesday, depressed by the prospect of a twice-monthly Unica crop progress report later this week showing further strong sugar output from Brazil's Centre South.
"We expect Unica's next report to show continued improvement in the Centre South Brazil crop," Sucden Financial's Nick Penney said.
New York's March lot stood down 2.6% at 19.08 cents a pound in midday deals.
The July 2013 contract stood at 19.26 cents a pound, a 2.1% decline on the day, while the October lot dropped 1.9% to 19.57 cents a pound.