Sugar is flooding the market but the sweetener will run into difficulty penetrating the European Union due to trade barriers 48 hours after notching its top price in 30 days, according to published reports.
The amount of sugar available is likely to be the most since 2007, Bloomberg reports. But inventories of the soft commodity in the European Union are unlikely to meet demand during the 12 months leading up to September, according to the European Sugar Users Committee, as cited by Bloomberg. The shortage is estimated to be 1.1 million tons.
While world sugar prices have dropped 22 percent since this past February, expenses and costs for the sweetener in the 27-nation bloc in Europe rose to their highest price in two years.
Formerly the globe's second largest shipper of the soft commodity, the European Union has devoted the equivalent of $7.1 billion in the past five years to decreasing the size of the industry in the fallout of a World Trade Organization ruling stating the European Union was delivering a subsidized supply of the sweetener on markets throughout the globe.
The European bloc did not pull back taxes on imports, which compelled consumers of the sweetener to decide between two options: they either paid 60 percent more than what was charged on the global market or they did not buy, which forced them to close operations.
The chief executive officer of the largest private-label producer in Europe lamented the inability to acquire the sweetener in Europe.
"We can't buy sugar in the EU because there isn't any," James Lambert with R&R Ice Cream of Northallerton, England told Bloomberg. "Anything like fizzy drinks, ice cream and bakery products is going to rise dramatically."
At 10:44 a.m. on Wednesday, sugar futures dropped 0.32 percent, a 0.09 cent slip to 27.76 cents per pound.
Reuters reports Monday saw sugar futures notch their highest value in one month of trading. The wire service cited preoccupations with damage caused by inclement weather in the globe's second-biggest exporter of the soft commodity.
Extensive flooding in Thailand caused difficulties with supply accommodating demand on Monday due to shipping delays. The globe's top shipper of sugar is Brazil.
"ICE raw sugar futures have perked above decent technical levels," a senior London-based sugar futures broker told Reuters earlier this week. "And concerns over delays in sugar leaving Thailand, rather than reduced crop size, are an overriding concern."
It was unclear whether the flooding damaged the sugar crops in Thailand, one broker told Reuters.
An analyst told the wire service that flooding in Thailand impacted more than shipping concerns.
Sugar prices' "rebound has come about partly on the back of the floods in Thailand which add a bit of logistical delay for the sugar crushing there," analyst Sudakshina Unnikrishnan with Barclays Capital told Reuters.
Senior industry authorities agreed, telling Reuters that the worst flooding in 50 years in Thailand is likely to push up crushing to late next month.
Forexpros reports global supply shortages helped push the sweetener to its highest price in four weeks.
Thailand's 2011-2012 output, given the extensive flooding causing delays with shipping and crushing, is estimated to be 99.4 million tons, according to Forexpros, which also suggested U.S. sugar is likely to see increased purchases of the soft commodity.
But Bloomberg also reports that the U.S. is likely to run into a sugar shortage because of the protection of farmers by trade barriers.
Earlier this month, the U.S. Department of Agriculture indicated inventories of the sweetener will drop to the lowest levels since at least 1960, when such recordkeeping began. The federal department cited one cause being the beet crop, which is enduring damages from rain and freezes.
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