Green Pool, highlighting India’s soaring sugar supplies, cautioned over the potential for prices of the sweetener to remain “low-ish”, even as it cut its forecast for output in many other producing countries.

The analysis group cut by 1.1m tonnes to 28.3m tonnes its forecast for sugar output from Brazil’s key Centre South region – a drop of nearly 7.8m tonnes year on year – citing mills’ scramble to maximise production of ethanol rather than sweetener from cane.

“The very low mix devoted to sugar is simply exceeding all historical norms, as millers pull out all stops to make the better paying hydrous ethanol,” Green Pool said, estimating at 1.95 cents a pound (in sugar terms) the price advantage of ethanol over sugar.

Production downgrades
The forecast for European Union sugar output was also cut, to 17.70m tonnes - down 1.21m tonnes from the group’s June estimate, and a drop of 2.0m tonnes year on year.

The cut reflected reduced expectations for the region’s beet crop, thanks to dryness which has “frizzled” other crops too.

“While several months ago, weather for EU beet crops had appeared very good, ongoing hot, dry weather has now taken its toll on beet and sugar production prospects.”

Some switch to ethanol was seen playing a role here too, with EU output of beet-based biofuel rising from the equivalent of 1.39m tonnes in 2017-18 to 1.60m tonnes in 2018-19.

Other producers seeing output downgrades included Russia and Australia.

However, while meaning a reduced figure for the world production surplus, reduced by 2.38m tonnes to 4.24m tonnes, strong Indian output, upgraded by 300,000 tonnes to 33.5m tonnes, would ensure that a deficit was avoided.

‘Virtually ensures low-ish prices’
Without India’s second successive “massive [cane] crop, the 2018-19 global balance would be a 4.145m-tonne deficit,” in raw sugar terms, Green Pool said.

“India is front and centre in the market’s consideration of the next 12-18 months, which look to add to an already very high global stocks situation.

“That virtually ensures low-ish prices for some time yet.”

New York raw sugar futures for October stood at 10.39 cents a pound in morning deals on Thursday, up 0.2% on the day, but remaining close to the 10-year low of 9.91 cents a pound set last week.

‘Almighty stew’
India’s strong sugar output prospects - forecast by many commentators taking it to top rank in world sugar production, overtaking Brazil – reflect state support, Green Pool said.

“India’s government is doing all it can to boost farmer incomes,” although in a policy which, in being based around guaranteed cane prices, “has left millers in an almighty stew as a result.

The government has “now taken to promising ethanol production subsidies, export subsidies, cane subsidies and minimum prices for ex-mill sugar” in a bid to support mills facing elevated raw material costs.

Tags: Green Pool