Sugar Stocks: Myth and Reality? (July Sugar Review)
The global sugar market is facing significant stress. A combination of long run events, such as the reform of Europe’s sugar regime, the destabilising impact of the credit crunch on Brazil’s heavily-leveraged sugar industry and shorter term weather events are testing the market’s limits on a daily basis. Though the fundamental reasons for higher sugar prices remain firmly intact, the rise in prices is driving an ongoing re-evaluation of assumptions in particular stock levels. Our view is that prices are not only reflecting the bullish statistical balance, but also much lower stock levels than many analysts would recognise. This also indicates that sugar prices have historically discounted supply chain risks in a way that now appears set to change.