Sugar Price, Supply, Demand: More News

In keeping up with the global sugar situation, reports of the global response to the unfavorable sugar output for 2009/2010 continue to stir in.

With India likely to encounter the worst repercussions from sugar supply and demand issues this year, the government is taking action.

Currently, the Indian government regulates the amount of sugar released into the domestic market by Indian sugar mills.

On Wednesday, it was reported that the Indian government may consider lifting these restrictions to help manage rising sugar prices, which have surged over 58.6% in 2009 (to 2914 rupees, or $59.80 per 100 kg).

In addition, the Indian government may demand that domestic sugar mills increase their supply of low-priced sugar for public distribution.

At present, sugar mills are required to sell 10% of their output to the government at reduced prices for issue to the impoverished (... are you thinking of Slumdog Millionaire, too?).

The new requirement may increase this number to 20%.

Other reports of government intervention include limitations on sugar stores that can be accumulated by large food, beverage and pharmaceutical companies, in an effort to "discourage hoarding."

The government may limit these companies from stocking more sugar than is needed for "15 days of consumption." As a result, the companies would likely import sugar to "support rapid growth."

In the interim, farmers in many countries (including Australia, China, Pakistan, Russia and Indonesia) have been planting more cane to "bridge the projected deficit" in sugar supplies.

The problem is, crops planted now can't be harvested for 18 months, so these efforts won't provide any immediate relief.

Commodity strategist at Commonwealth Bank of Australia, Luke Matthews, said,

"We do expect a significant production response and when that production response comes through, we'd expect prices to come off.

"But in the meantime, prices certainly have room to move higher."

With so much attention surrounding this commodity, be sure to keep your eye on wholesale sugar prices as they change.