Sugar is one of the most basic commodities. Countries throughout the world are wanting sugar. Supplies of sugar are reaching a 20-year low this year. The shortage may become especially acute in the third quarter.
Here some supply/demand statistics:
- India the biggest importer may need an extra 2.5 to 3 million tons to meet a 7 million ton deficit.
- China, the biggest consumer after India may have a deficit of 3.3 million tons.
- Pakistan, Asia's biggest user, plans to purchase 1.25 million tons.
- India, China, Indonesia, Pakistan, Egypt and Russia are planning to buy sugar. However, it may raise the deficit to 11.92 million tons.
- The shortfall may be 5 to 6 million tons.
- On the supply side, Brazil, the top producer, may have an increase of 4.4 million tons to 35.5 million tons.
- Next year we may see a surplus of 1.5 million tons.
March sugar futures rose 3.2% to 27.44 cents per pound. Futures reached 30.4 cents per pound on February 1.
A long sugar trade may work out for the next quarter. However, when Brazil's crop comes on line, the supply shortfall may ease. Markets often anticipate future events and discount them. Be careful.
The last day of trading for the May sugar contract is April 30. Watch the price action, especially during the last two weeks of April for a hint of supply and demand going forward.
Would you buy sugar futures?
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