Global sugar prices to fall by end-2011

nRaw sugar seen at 24.75 U.S. cents at year-end

nWhite sugar forecast at $663 a tonne at year-end

nGlobal surplus estimated at 7.3 mln T in 2011/12

JAKARTA/SAO PAULO (Reuters): Raw sugar futures could slip to around 24 U.S. cents a pound at the end of 2011, while whites will drop from all time highs, with the global market likely to see a surplus of more than 7 million tonnes in the crop year to September 2012.

Congestion at ports in top producer Brazil could ease towards the end of this year, while excess supply from India, the world’s largest consumer, could also weigh on prices, according to a median forecast of 11 dealers and analysts.

“The funds will follow the price trend and this depends on the short and medium-term market fundamentals. According to my expectations, in the short-term they will buy,” said Julio Maria Borges, CEO of analyst Job Economia.

“After the third quarter they will sell,” he added.

The median forecast is for the front-month ICE raw sugar SBc1 to reach 24.10 cents a pound at the end of the third quarter before steadying at 24.75 cents at end-2011, still down from a four-and-a-half-month high at 31.33 cents hit earlier this month and a 30-year peak at around 36 cents in February.

Front-month LIFFE white sugar futures LSUc1 were forecast to trade at $675 a tonne at the end of the third quarter before falling to $663 a tonne at the end of this year, down from a record of around $890.10 a tonne in July.

White sugar, which often tracks New York raws, rallied to their highest ever on gains across commodities, a weaker U.S. dollar and diminishing prospects for the crop in Brazil after industry group Unica cut its forecast for the center-south crop in 2011/12 by 6.2 percent.

Global sugar prices have also been supported by port congestion and delays in sugar loadings in Brazil, which is nearing the peak of the 2011/12 harvest, but analysts say the supply fears could eventually diminish.

“There is in fact very little congestion of substance at Brazilian ports now except at Cargill’s terminal, and that is somewhat artificial,” said a physical dealer in Singapore, who forecasts raws at 23.5 cents at end-2011.

“At some stage in the next three months, supply will exceed demand and physical premiums will fall, followed by the futures. That story is yet to evolve, and funds may well find out that the fundamentals of the global market aren’t entirely centred on centre-south Brazil alone.”

The global market is expected to see a surplus of 7.3 million tonnes in the crop year to September 2012, according to the poll, with the forecast ranging from as low as 3.5 million tonnes to as high as 9 million tonnes.

A Reuters sugar poll in January expected the sugar market to be closely balanced in the 2010/2011 crop year.

There will probably be a short-term tightness in the market which should buoy values, said Jack Scoville, senior analyst for brokers The Price Group in Chicago, but the situation should ease as other producers churn out the sweetener going forward.

“Brazil is the main player in the market, but it’s not the only player in there,” said Scoville.

Analysts say India will be another key player in the global market as it allows more exports in the next few months. India has decided to allow another 500,000 tonnes of unrestricted sugar exports under the Open General Licence scheme, doubling its overseas sales this year.

“I expect India to sanction another 500,000 tonnes later this year under OGL, making a total of 1.5 million tonnes. This will have a short-lived negative impact,” said Gary Mead of Worldcrops.com

India, also the biggest producer after Brazil, should churn out 24.2 million tonnes in the current 2010/11 season and output may jump to 26.5 million tonnes in 2011/12, according to industry estimates. The country consumes an estimated 22 million tonnes a year.