How much more expensive will sugar be in the short run and why?

 Market Leader informed

People around the world feel how sugar and other staple foods are getting more expensive: Moldova, Ukraine, Belarus, Kazakhstan, Germany, Switzerland and other countries. World mass media vie with each other in telling people about constantly changing prices. Yet they forget do the key thing, i.e. to perform an analysis of the situation instead of simply stating facts, so that people could understand:
• why the sugar price suddenly started to grow
• how much it will increase in the near future
• what will be the short-term consequences of the governmental measures around the world to restrain the price growth

According to our expert Ivan Kurapov, the head of the Department of Market Sentiment Analysis, Masterforex-V Academy, originally the swift increase in food prices is caused not by speculators (which are blamed for the situation), but by the rapid growth of the sugar futures index at all the exchange markets around the world resulted from:
• environmental factors: droughts and floods in different parts of the globe
• a cutback in sugar production in the central and southern parts of Brazil, which is the world’s major sugarcane producer
• a cutback in sugar production in India this year as a result of slight monsoon rains and droughts in 278 administrative districts out of 626 ones.

The Daily chart of the sugar futures at global exchange markets shows uptrend, which is expected to continue, while the series of up-bars at high volumes has been changed for a retracement, Kurapov specifies. The retracement is not welcomed by the market as the volumes have been declining along with the price. It makes us think that the retracement won’t last long with a return to the $28.38 level. The uptrend may stop at the $30 high. The futures price has never risen higher than that. If market prices on sugar keep growing then only the producers themselves will be able to restrain them. However, the producers are not interested in restraining the price growth.
The prices of all the food futures around the world are currently increasing, which only confirms that the price on sugar will also keep growing.


For example, such food items as cheese and eggs have become more expensive as well. The Ukrainian Club of Agrarian Business (UKAB) reports that the prices on meat in the country are rapidly growing: the current price on pork and beef is record-breaking over the last 10 years. Even a glance at Lean Hogs futures is enough to notice a seasonal decrease in price on meat. Yet there is no grounds for a tendency change as high volumes support the down-bars.



World-famous companies’ forecasts do not speak in favor of consumers as well. According to the International Sugar Organization (ISO), in late 2010 - early 2011 the situation at the global market of sugar will remain tense as the exporters’ production potential will be equal to the importers’ demands. So there is no sugar surplus expected in the near future. Besides, further rush demand for sugar expected around the world or a cutback in the volume of the 2011 sowing campaign and consequently a cutback in production may force the global white sugar market to stay in deficit, with a further price increase.

What are the current sugar prices around the world? Market Leader’s staff correspondents report:

Studying Moldova’s experience of maintaining low sugar prices.

According to Evgeniy Antipenko (ATEI, Kishinev), the head of the VTMT Department, in the 90s big-scale German investors got interested in Moldova’s sugar industry and invested in it. Here is the list of what they did in the 90s and have been doing:
• improved equipment and changed major funds
• raised salaries, introduced economic incentives at sugar refineries, making each employee interested in max net profit
• have been subsidizing farm enterprises and growing sugar beet
• have been lending the world’s best sugar-beet seeds
• have been helping with beet harvesters and transport during the season of harvesting etc

The Moldovan parliament has reduced taxes on sugar-beet production and refinement.
The phenomenon of Moldova implies that the approximate annual output of sugar production is 120 thousand tons while the domestic consumption is 60-65 thousand tons. The rest is excess (surplus). According to Mr. Antipenko, the German-Moldovan joint venture “Südzucker” is in the mode of associate trade with the EU, i.e. the company’s sugar export is duty-free. Thereby, he supposes that the export volumes have declined as the EU under the economic crisis has reduced the import of sugar. Moreover, Moldova may face difficulties exporting the excess sugar to the CIS states. Consequently, Moldova is very unlikely to experience any increase in sugar price.

How much more expensive will sugar be?

Ivan Kurapov thinks it will depend on the following 3 issues:
• How much the price of sugar futures will increase. According to Masterforex-V TA,it has already gained 9,4 % and still has a potential of reaching the resistance levels at $28,38 (9,4 %), and $30 (12,6 %).
• Seasonal factor. Currently Ukraine is finishing sugar harvesting, sugar refineries increase their activity, which restrains the price growth in the country. After the short-term seasonal retracement the retail and wholesale prices on sugar will definitely start growing fast.
• Sugar producers and distributors, which are currently trying to earn on the price growth after the unprofitable year.

How effective are the governmental measures to restrain the sugar price growth?

Market Leader’s offices in 55 countries of the world report that the governments of almost all the countries are now taking steps to stabilize the situation at the sugar market. Different measures are being implemented, yet not many have chosen the way of Moldova. Here is the list of some of the measures:
• restraining the price growth through subsidizing the domestic market of sugar
• quotes for restraining the exports of crop traders
• embargo on the exports of sugar and crops
• contests for those sugar producers who want to obtain a license
• supporting the sugar producers and increasing the attractiveness of sugar industry for investors

The analysts of Masterforex-V Academy: at this point the sugar price has stopped at $28.36 and is moving within a flat while the “sell” volume is declining, yet nobody know how long it will last. The seasonal index and Commitment-of-Traders (COT) speak in favor of a possible further decline in the price of “the sweet futures”. However, it may start either with a rebound from $28.36 or after reaching the $29.7 – $30.4 area of the maximum.
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