* Brazil production gathers pace after slow start
* India monsoon revives, boosting crop outlook
* ISO forecasts wider global surplus in 2012/13
By Nigel Hunt
LONDON, Sept 7 A turnaround in weather fortunes
for leading sugar producers has boosted the sweetener's surplus,
sending futures to 2-year lows with further losses expected.
The global sugar market balance has moved towards a wider
surplus than originally anticipated, with improved weather from
the top two producers India and Brazil.
As a result, October raw sugar futures traded on
Intercontinental Exchange (ICE) hit a two-year low of 18.81
cents a lb on Thursday, barely more than half the peak of 36.08
cents traded in February 2011.
"I do not see anything that could lead to a recovery of
prices in the near future," analyst Stefan Uhlenbrock of F.O.
"I think the main subject is the improved weather in Brazil
and this is obviously pressuring the market and it will bring
more sugar in coming weeks and months with crushing there at a
very strong pace," he said.
Rains kept sugar mills in Brazil from crushing at full
capacity earlier this year but eased in early July and the
industry has produced at an impressive rate since then.
"The sugar market is in good supply. If you look at Brazil,
things have picked up quite well after rain was stopping the
harvest for a while earlier in the season," said analyst
Muktadir Ur Rahman of Capital Economics.
"We expect sugar prices to remain weak," he added, noting
his end-year price forecast was 18 cents a lb.
Licht analyst Uhlenbrock said a further bearish factor for
prices has been the weakness of Brazil's currency which lowers
costs in dollar terms for the country's sugar mills.
The Brazilian real was around 2.03 per dollar on
Friday, up from around 1.65 a year ago.
INDIA MONSOON REVIVES
The crop outlook has also improved in India, the second
largest producer and top consumer.
India's monsoon has revived, lifting the threat of prolonged
drought in the major sugar producer with a second consecutive
week of heavier-than-normal rains.
"Concern about production in India has waned given the
revival of the monsoon," Capital Economics' Rahman said.
A huge rise in production in Russia, at one time the world's
leading importer of raw sugar, has also curtailed demand for the
commodity on international markets.
F.O. Licht on Friday forecast that Russian beet sugar
production would climb to 5.50 million tonnes, raw value, in
2012/13, marginally up from the prior season's 5.48 million but
far above the 2.96 million produced in 2010/11.
"Russia will see bumper output for a second consecutive
year, at levels that seemed unimaginable just a few years ago,"
"The country will therefore remain absent from the world
market as a large-scale raw sugar importer for the second
consecutive year and seems likely to remain an exporter of beet
sugar to nearby landlocked neighbours."
The International Sugar Organization last week said it
expected a wider global sugar surplus of 5.86 million tonnes in
2012/13 (October/September), up from the prior season's surplus
of 5.19 million tonnes.
The ISO said the stocks/consumption ratio could rise to
around 40 percent in 2012/13, from 37.6 percent in 2011/12.
"This suggests that the period of low stocks environment,
one of the main market characteristics for the past four seasons
from 2008/09 to 2011/12, would be over," the intergovernmental
body said in quarterly report.
(Reporting by Nigel Hunt; Editing by Veronica Brown and Mike