Green Pool hinted at downbeat prospects for sugar prices as it raised its estimate for the production surplus for this season, forecast another stockbuild in 2018-19, and said a third one could be in the offing.

The Australian-based analysis group said it was “relatively pessimistic on our market outlook”, thanks to the boost to supplies from an 11.51m-tonne output surplus in 2017-18 – an upgrade of 1.9m tonnes from its previous figure – plus the prospect of a 5.3m-tonne surplus next season.

World stocks are poised to end 2018-19 at 94.5m tonnes, the highest for decades in absolute terms.

As compared with consumption - to form the stocks-to-use ratio viewed as an indicator of price potential - inventories will hit 51.1%, “the highest level on our records”, Green Pool said.

‘Three-year surplus’

A further production surplus may follow still, in 2019-20, with Green Pool saying that “the more normal cycle in sugar is for a two-year deficit followed by a three-year surplus.

“So, this surplus cycle is only just starting to impact the market.”

The comments came at the start of the Dubai sugar conference, one of the highlights of the industry calendar, where other announcements on Sunday included an Al Khaleej Sugar Refinery deal to produce beet sugar in a deal signed with the Egyptian government.

The $1bn project is aimed at producing an extra 900,000 tonnes of sugar a year in Egpyt, and making the country self sufficient in the sweetener.

Brazil vs India

Green Pool’s estimate of a 5.43m-tonne world sugar production surplus in 2018-19 came despite an expectation of output easing by some 2.70m tonnes from this season’s record high, to 191.8m tonnes.

This is “mainly due to [a] sharp reduction in Centre South Brazil sugar output”, seen tumbling by 4.0m tonnes year on year to 32.0m tonnes, on ideas of a small drop in the cane crush, to 590m tonnes, coupled with a drop to 42.5% in the proportion of the crop turned into sugar rather than ethanol.

“A big switch into ethanol in 2018-19 should see sugar output fall sharply,” the analysis group said.

Indian output, by contrast, will rise by 2.5m tonnes to 28.8m tonnes, helped by “improved cane yields and sugar recoveries” in Uttar Pradesh.

‘Health concerns and taxes’

However, output will still remain well ahead of consumption, seen rising by 2.88m tonnes year on year to 184.9m tonnes.

“Sugar consumption growth is slow, and health concerns and taxes seem likely to keep it that way,” Green Pool said, forecasting a further season of contraction in Western European demand, although with African and Middle Eastern consumption growth by more than 2%.

On Friday, INTL FCStone raised by 800,000 tonnes to 3.6m tonnes its forecast for the world sugar production surplus in 2017-18.

For 2018-19, the brokerage forecast Brazilian Centre South output of 32.4m tonnes, on a cane harvest of 592.5m tonnes.