With sugar prices back in the tank, farmers appear to be looking to other crops. Here is a sample of articles I found as supporting evidence.
As a result, I believe supply numbers may disappoint over the next couple of years – which could trigger another price run-up. That would make this an attractive time and entry price for ’08 and ’09 sugar contracts.
Low prices force cane farmers to diversify
Fiji Times – Dark days ahead for sugar cane farmers
However, some analysts are predicting further losses in the weeks to come:
Sugar supply gut
When prices hit $.20/lb in Feb ’06, a 25 year high, India and Brazil cranked up production, leading to the current supply glut.
Brazil mergers to come?
International Sugar Organization (ISO) rep says oversupply will probably persist until 2009.
India’s millions of sugar farmers “are in crisis” – this tells me that when this oversupply is corrected, we’ll see a sharp bull market.
My $0.02 – normally I would be scared away by this oversupply, and I would be content to sit on the sidelines for a year or two. However, I have a feeling that $80 oil is the wildcard here – it has never been more attractive to turn sugar into ethanol, as the price disparity between oil and sugar has never been greater. That may provide a cure for the glut.