The worst may not yet be over for sugar traders
February 06, 2018 at 6:18 AM
The glut that’s plaguing the market this season will probably extend into 2018-19, with Green Pool Commodity Specialists forecasting a surplus of 5.4 million metric tons.
Production is expected to expand in India and Australia, and farmers in the European Union are set to plant another big crop. Supplies are growing outside Brazil and traders are turning their focus away from the world’s largest producer, according to the Brisbane, Australia-based researcher.
Traders meeting at the Dubai Sugar Conference this week will be looking at what the next season holds with prices down more than 30 percent over the past year. "In a big surplus year like this, there are many other producers taking the lead role," Tom McNeill, a director at the researcher, said by phone, citing India and the EU. "The magnitude of the Brazil center south crop as a determinant of where the market is going is diminished this year."
Another year of excess supplies follows a surplus of as much as 11.4 million tons this season, according to Green Pool, which revised its 2017-18 estimate upwards by almost 1.1 million tons.
While production will fall for the first time in five years, consumption is facing headwinds. Sugar output in India, the world’s second-largest producer, will jump 9.5 percent next season to 28.8 million tons, according to Green Pool. The forecast for the current season will probably be revised higher again. In the EU, production rose to 20.4 million tons as planted area expanded 18 percent due to the liberalization of the market. While planted area will probably decline 1.1 percent for next season, output is still seen strong at 19.5 million tons, the researcher said. Production in Australia will recover to 4.6 million tons. Good progress of current crops in the northern hemisphere means the glut could still get bigger in 2017-18, Green Pool said. While millers in Brazil will turn to making more ethanol in the 2018-19 season that starts there in April, that won’t be enough to offset production increases elsewhere. Sugar output in the center south, Brazil’s main growing region, will drop by 4 million tons to 32 million tons, the researcher estimates. Millers will direct 42.5 percent of their cane to making sugar, down from 46.6 percent. The rest will go to production of ethanol.
Other highlights of the report:
* Chinese output is forecast to rise to 10.9 million tons in 2018-19, from 10.3 million tons
* While a new sugar regime in Thailand makes it harder to forecast next season’s output, millers will probably probably produce 11.7 million tons, a slight decrease from this season’s 11.9 million tons
* Global consumption will grow 1.6 percent in 2018-19 and 1.4 percent this season, still below the long-term level of 2 percent
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