Green Pool signalled further weakness ahead of sugar prices, lifting its forecasts for the world production surpluses this season and in 2018-19, and heralding a further one in 2019-20.

The Australian-based analysis group said that sugar prices - which for New York raw sugar futures touched 12.25 cents a pound on Wednesday, the lowest for a spot contract since September 2015 – had actually “held up remarkably well in the face of the surplus and addition to stocks”.

However the resilience - in the face of a 4.4m-tonne output surplus in India, for which production estimates have attracted a range of upgrades - raised the question whether the “could be further pressure” on prices if the country unveils the export programme that many commentators have forecast.

And longer-term, the market had to grapple with a series of world production surpluses, with Green Poll lifting its forecast for the 2017-18 figure by 3.72m tonnes to 14.87m tonnes, while upgrading the 2018-19 surplus by 515,000 tonnes to 5.95m tonnes. 

‘Stocks are blowing out’ 

The successive years of excess output will drive up world sugar inventories this season by a hefty 14.9m tonnes this season to a record 92.71m tonnes. 

“Global stocks are blowing out as this surplus comes home to roost,” Green Pool said. 

In 2018-19, inventories will grow again, to 98.66m tonnes, an all-time high in terms of stocks and their ratio to consumption, to form the stocks-to-use ratio much watched as an indicator of pricing potential. 

The inventory growth “raises global stocks-to-use from 50.8% to 53.2%. 

“That will be a record high stocks-to-use, in turn generating a pessimistic market outlook.” 

‘Price has some work to do’ 

Green Pool, underlining ideas of weak sugar values ahead, said that “price appears to have to do some work to do to reduce surplus production, as consumption is highly unlikely to be able to take up much of the slack”. 

Sugar demand growth is being curtailed health concerns, which have gained a particularly high profile in Western countries, but are gaining ground elsewhere too. 

“It isn’t just so called ‘developed countries’ that are experiencing low consumption growth rates in sugar - it is spread across the board,” the analysis group said, albeit underlining that “the European Union has experienced negative rates for the past three years, and we forecast two further years of falls”. 

In fact, Green Pool signalled the likelihood of a further world production surplus in 2019-20 too, saying that “2018-19 will be year two of a possible three-year surplus cycle in sugar before it can swing back to a deficit situation”, although it stopped short of issuing a detailed forecast. 

‘Massive expansion’ 

The upgrade to the forecast for the 2017-18 surplus reflected in the main an upgrade of 3.78m tonnes to 198.27m tonnes in the outlook estimate – representing an “enormous” 19.39m-tonne rise year on year. 

“It has been obvious to anyone paying close attention to the sugar fundamentals that the burgeoning Indian and Thai crops must inevitably push the 2017-18 surplus higher.” 

The group forecast a “massive expansion” in Indian sugar output to 29.6m tonnes, in line with the Indian Sugar Mills Association estimate, while Thai production was pegged also at a record, of 13.1m tonnes, helped by an expected sugar yield of 109 kilogrammes per tonne of cane which “if realised, that would be the best sugar yield figure in our records since the late 1980s”.

 For 2018-19, Indian output was seen rising further still, to 30.6m tonnes, with “over 20% of next year’s planting of 18-month cane… already growing well”, although with production in the likes of Brazil and Thailand seen retreating, world sugar output was seen falling back to 192.76m tonnes - albeit, remaining ahead of demand.