The price of sugar looks set to fall as a result of a glut of supply, following the possibility of a second consecutive year of production outstripping demand, according to leading brokerage outfit City Index.
CFD broker City Index has warned traders to expect a slump in sugar prices should output surpass demand for a second year, amidst concerns that recent historical high prices have encouraged more growers to turn their attention to sugar planting.
Following high sugar prices, it is feared that a surge in planting by farmers worldwide could in fact undermine global sugar prices and result in a weaker market for sugar, prompting investors to consider the likely future price of sugar ahead of the end of the season in September, where a glut of around a million metric tons is expected.
Sugar prices have enjoyed a resurgence in recent months, rising to their highest rate for over 30 years in February as a consequence of ongoing speculation and heightened demand for sugar-based products.
However, with the estimated oversupply potentially hampering prices by as much as 15%, the short-term outlook for the sugar market looks less robust than may previously have been the case.