Sugar, the third worst performing commodity this year, will be under “pressure” as global production exceeds demand for a third year in 2012-2013, according to the International Sugar Organization.

A rebound in output in Brazil, the world’s biggest producer and exporter, and improved harvests in China, the largest net importer, and Australia will boost global supply by 2.25 percent to a record of 177.4 million metric tons of raw value, said Peter Baron, an executive director of the London-based group. Production will outpace consumption by 5.85 million tons from an estimated 5.2 million tons in 2011-2012 and 1.3 million tons a year earlier, he said.

Futures have dropped 12 percent this year as prospects improved for the crop in Brazil. World stockpiles will reach a four-year high of 31.6 million tons at the beginning of 2012- 2013, the U.S. Department of Agriculture estimates. China is set to harvest its second-largest crop in the year starting October, lifting production 19 percent to 13.7 million tons, the median estimate in a Bloomberg survey showed.

“Supply will be quite heavy for the market over the next two-three quarters,” said Tom McNeill, a director at the Brisbane, Australia-based researcher Green Pool Commodity Specialists Pty. Prices may fall to 17.5 cents a pound, a level that may attract Brazilian growers to switch to making ethanol, he said. That would be the lowest price since July 2010.

Raw Sugar for delivery in March rose 0.6 percent to 20.39 cents per pound on ICE Futures U.S. in New York by 6:15 p.m. Singapore time yesterday. The most-active contract fell to a two-year low of 18.81 cents on Sept. 6 after climbing 16 percent in June and July as rains delayed harvesting in Brazil. Sugar is the worst performer this year after coffee and cotton on the Standard & Poor’s GSCI Spot Index of 24 raw materials.

China Demand

“Taking into account the third year of global surplus with a possible end of the low stocks environment, we think that prices could remain under bearish pressure,” Baron of ISO said in an e-mail, responding to Bloomberg’s questions.

Global export availability is estimated to climb to 54.5 million tons, while demand for imports may reduce to 48.3 million tons, Baron said.

Imports by China will fall to 1.95 million tons in the 2012-2013, assuming no further purchases after rebuilding stockpiles, said Baron. China’s net imports in 2011-2012 are estimated at 3.3 million tons, exceeding U.S. purchases by 25,000 tons and making it the world’s biggest importer, according to ISO data.

Production in India, the second-biggest grower, will drop to 26.6 million tons from 28 million tons in 2011-2012 because of dry weather, reducing export availability to about 2 million tons of raw value from 3 million tons estimated for this year, said Baron.

In Thailand, the second-biggest shipper, output will fall to 10.2 million tons from 10.6 million tons this year, according to the ISO quarterly report.

Sugar production in Brazil will rise 3.9 million tons to 38.1 million tons in 2012-2013 and will remain below the 2009- 2010 record of 40.9 million tons, according to the report. “So far the crop in Brazil is developing in line with our expectations at the end of August,” Baron said.