Commodities | Aug 12 2009
By Rudi Filapek-Vandyck
International sugar prices have soared to US21.80c a pound, a price level not seen since mid-1981. Already, media reports are suggesting canegrowers in Northern Queensland -widely considered a human species soon to be extinct as recent as five years ago- are salivating about the prospect of at least 12-18 months of a continued strong pricing environment. Such prospect is being confirmed by industry watchers at Rabobank, to name but one.
Industry analysts at Salman Partners in Canada have opened the bottom drawer of their desk and let slip out some good old memories. The price of sugar may have surged to levels not seen in more than 2.5 decades. but they are still 70% below the all-time high peak of the mid-seventies, the analysts point out. They immediately add: not many things in life today are priced 70% below what they were in 1974.
What follows next can only be relived through the memories of those old enough to reminisce: “Ah, 1974, when, as we recall, restaurants used to keep their sugar bowls under lock and key to prevent us from pocketing their contents.”
As one would expect that at some point farmers will increase their plantings and crops in response to the more lucrative pricing environment for sugar. Salman analysts suggest this should bode well for producers of potassium and phosporus, in other words: a higher sugar price should translate into higher demand for fertilisers.
That plus the fact that many an expert believes the outlook for sugar prices remains positive with farmers struggling in key areas such as Brazil and India due to weather related circumstances.
It may sound amazing, but if we only move back a few months further back in time (than mid-1981) sugar was priced at more than double today’s price – and that still wasn’t anywhere near prices reached in the mid-seventies.
