August 6, 2015
Econotimes | http://goo.gl/nVEiM1
The raw sugar price came under renewed pressure yesterday and recorded a new 6½ year low of 10.74 US cents per pound. One reason for the low sugar price is the weak Brazilian real, which makes it attractive for Brazilian exporters to sell raw sugar from the ongoing harvest on the world markets.
This serves to further flood the already oversupplied market with sugar. In addition, news from India is also weighing on prices: according to government sources, the Indian government may pass a law which would oblige Indian sugar mills to export significantly more sugar.
"The objective of the planned export obligation is to reduce the high domestic stocks in a bid to shore up domestic sugar prices. If the law were to come into force at the start of the new crop year on 1 October 2015, meaning that India would export considerably more sugar from October, this would doubtless put additional pressure on sugar prices", says Commerzbank.
After all, India looks set to have a good 10 million tons of sugar stocks at the start of the new crop year, which are likely to grow in view of an expected production of 28 million tons and demand of 24-25 million tons.
"The resulting export potential would cover the global supply deficit so far anticipated for 2015/16. The overproduction in India is a consequence of state-set selling prices for domestic sugar cane producers that are well in excess of market prices", added Commerzbank.