The US government on Thursday sharply reduced its projection for a global sugar supply shortfall in the current 2016/17 year, but said prices are still likely to continue to be high as inventories fall to a six-year low and demand hits a record high.
The world sugar supply deficit will narrow in the current 2016/17 crop year to 2.6 million tonnes from 6.7 million tonnes a year earlier, the US Department of Agriculture (USDA) said in its biannual sugar report on Thursday. That was down from a May projection of a deficit of 4.3 million tonnes.
The smaller-than-expected deficit comes as output in key producers including Brazil and China offsets lower production in other regions. "Despite production gains in 2016/17, low stock levels portend another year of rebuilding supplies amid strong prices," USDA said in the report, noting consumption is forecast to hit a record high of about 174 million tonnes. Benchmark raw sugar prices traded on ICE Futures US have soared by one-third to about 20 cents per lb year-to-date, as the world shifted to its first supply deficit in six years in 2015/16 crop year that ran through September 30.
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