Sugar market seen balanced

Sugar supply will just cover demand this year and prices will fall by the end of 2011, a Reuters poll showed, although that fine balance could easily be upset by dire weather or logjams at Brazilian ports. Adverse weather in several key producers, which has pushed sugar prices near 30-year highs, eroded the median forecast in the biannual Reuters poll of 20 analysts from a 4.5 million tonne surplus in the previous July poll.
"The market is teetering between deficit and surplus," said Keith Flury, a senior commodity analyst at Rabobank in London. Analysts said raw sugar and white sugar futures are likely to rise in the first quarter before Brazil's next crop and then fall as farmers increase planting to benefit from those prices.
The latest estimates still came in much higher than the forecasts in the previous poll. ICE March raw sugar futures, which touched a 30-year peak of 34.77 cents a lb on December 29, were up 0.12 cent at 31.96 cents a lb on Wednesday. The poll indicated they will rise to 34.40 cents a lb at the end of the first quarter and then fall to 25.25 cents at the end of 2011.
The previous poll predicted an average of 15.38 cents a lb for the year. The big question mark is the weather after detrimental conditions hit key producers such as Russia, Brazil and Australia in recent months. Gary Mead, an analyst with VM Group, said, "Sufficient supply will be a concern for much of this year. This may enforce some demand rationing if international prices rise significantly."
Liffe March white sugar futures were down $1.00 or 0.1 percent at $780.50 per tonne on Wednesday. They were forecast to rise to $800 a tonne at the end of the first quarter and fall to $640 a tonne at the end of 2011. In the previous poll, they were seen averaging $495 per tonne in 2011.