Increased sugar supply risks may lead to super bull market, says former Wilmar head

By Marcelo Teixeira

NEW YORK, Sept 14 (Reuters) - The El Nino weather anomaly and shrinking sugar stocks in India will provide the conditions for a super bull market, according to the former head of sugar operations at Singapore-based commodities trader and processor Wilmar International WLIL.SI.

"It could really be the super-hot commodity of 2027, as what is currently happening affecting sugar could trigger one of the most bullish markets seen for past 20 years," former Wilmar executive Jean-Luc Bohbot told Reuters.

The last third of the sugar crop in top grower Brazil will likely be affected by too much rain, while India, the second-largest producer, could be forced to import "substantial volumes," he said.

This will likely lead to further price spikes even after the 20% rally in August, said Bohbot, who left Wilmar earlier this year after 15 years with the company.

"The risks (of shortage) have not diminished during the rally; they have strengthened," he said.

"India had an average/uneven monsoon, combined with very low stocks and in my view local S&D (supply and demand) deficit," Bohbot said. "Exports will disappear entirely, and India could instead become an even larger importer in 2027."

The Indian government has allowed duty-free imports this year to improve local supplies and try to cool prices.

He said hot, dry weather hurt production in Europe and Indonesia. Production in Thailand, the world's second-largest exporter, will fall because some farmers switched to growing cassava, Bohbot said.

He said cane processing has been delayed by rain on about 25 million tons in Brazil. Forecasts for further rain in September suggest "the existing delay may therefore not be recovered and could increase," he said.

Brazil sugar production could fall by 3 million to 5 million tons this year from last season if rains continue over October and November, he said.

"Consumers largely missed the rally and remain underpriced, while producers are now much better hedged. After the October expiry, funds could therefore have a relatively open field for the next few months," Bohbot said.

One minor bearish factor for the market is the Middle East situation, he said, due to an expected fall in sugar consumption in the region amid the military action.