Sugar on the Upswing
CHICAGO (AP) _ There is more sugar around now than needed to satisfy the craving of the world’s collective sweet tooth.
Nonetheless, the price has increased almost unhindered for the last month, although there were a couple of sharp setbacks this past week that left sugar at about 8 cents a pound. That is more than triple the low of about 2 1/2 cents a pound last summer.
A combination of factors is at work here, analysts say, and they add up to a shrinking, although still large, world stock of sugar.
″We’ll have a drawdown in stocks for the first time in years,″ said Judith Weissman, an analyst in New York the investment firm Shearson Lehman Brothers.
Industry people believe the 1985-86 season will show a 7.4 percent drop in the stock of sugar, down to 38.19 million metric tons. A metric ton is equal to 2,204 pounds.
While this still would be large by the standards of recent years, each unfolding chapter in the drawdown story has injected a bullish note on the trading floor at the Coffee, Sugar and Cocoa Exchange in New York.
Two major sugarcane producers, Brazil and Cuba, suffered weather damage to their crops and both countries have postponed some shipments of sugar.
″Cuba had a persistant drought and then hurricane damage,″ said Ms. Weissman.
This season’s crop on the island is expected to be 16 percent to 20 percent below what had been expected.
Because of Cuba’s shortfall, it has been unable to meet the needs of the Soviet Union, analysts say.
A recent runup in futures prices on the Coffee, Sugar and Cocoa Exchange has been attributed to talk of the Soviets coming into the open market in a big way.
″There’s talk of the Soviet Union buying 150,000 tons through Australia and 500,000 tons to 700,000 tons through Japan,″ Ms. Weissman said.
It is too early to tell if 1986-87 will be another year of drawdown, although analysts seem to believe this will be necessary for the price to continue rising much beyond where it is now.
Europe is putting in the 1986-87 sugar beet crop now and there are indications that plantings will be reduced.
″But final production plans have not been completed, and if prices continue to rally, Europe could plant more,″ Miss Weissman said.
A realistic outlook is for prices to move to the 12- to 13-cent range before the October contract expires, she said.
Another analyst, Pamela Rockley of Prudential-Bache Securities Inc. in New York, said she expects prices to move up to around 10 or 12 cents.
The setbacks Thursday and Friday saw limit drops both days, accompanied by ″a little bit of panic selling,″ Ms. Rockley said.
Despite the full cent decline over the two days, ″I don’t think anything has changed fundamentally,″ she said.
There may be few, if any, observers who foresee a repeat of the surge of 1979-80 when prices went to 45 cents a pound.
″But there was a tremendous global surplus then, too, but the sugar never came on the market,″ Ms. Weissman said. ″I don’t think anybody is expecting it now, but you can’t help thinking about it.″
End Adv Weekend Editions April 12-13