NEW YORK: The world's sugar supply balance is expected to improve in the 2021/22 season that started this month due to higher production in Asia and Europe, which will partially offset another poor year in Brazil, broker StoneX said in a report on Tuesday.

Despite the improvement, the season will still see demand surpassing production for the third consecutive year, the report said, projecting a supply deficit of 800,000 tonnes in 2021/22 compared to a deficit of 2.9 million tonnes in 2020/21, meaning stocks will continue to decrease.

Thailand's sugar production is seen jumping 39% in the new season to 10.5 million tonnes, while India is expected to have another large crop at 31.5 million tonnes, 2% more than the previous, due to overall favorable weather conditions in Asia.

Indian production would have been higher, StoneX says, if not for a diversion of sucrose to ethanol production equivalent to 3 million tonnes of sugar.

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"There continues to be strong stimulus to ethanol production in India. Mills there are receiving around $2 per tonne more to make ethanol instead of sugar," the analyst said.

In its first estimate for the next Brazilian crop, it projected centre-south (CS) sugarcane crush at 565 million tonnes, 6% more than this year's crop that was hurt by drought and frosts.

Brazil's sugar production should improve 2% to 34.2 million tonnes, while ethanol output is seen rising 5.5% to 29.7 billion liters.

Brazil's ethanol production growth, however, is due to higher volumes from corn processing plants. StoneX sees corn-based ethanol production to jump 12.8% in 2022/23 (April-March) to 4 billion liters.

Sugar production in the European Union plus United Kingdom area is projected to rise nearly 12% in 2021/22 (Oct-Sept) to 17.2 million tonnes, as a wetter summer in Europe boosted yields for beet.