The world sugar market is on course for a surplus of 3.5 million tonnes in the 2017/18 season, commodity trade house Sucres and Denrees (Sucden) said in a quarterly report on Wednesday. The sugar trader pointed to higher output in the European Union, India, Thailand and China as a key driver. "Crop forecasts point to a significant increase in production in many countries," the trade house said, adding that "the probability of El Nino has recently decreased and therefore causes less risk to global weather."
Sucden said it sees global production rising by 9 million tonnes to a record 183 million tonnes in the 2017/18 season, which runs from October to September. Consumption, meanwhile, is seen growing by around 2.5 million tonnes, or 1.4 percent, to almost 180 million tonnes as demand in India and China starts to recover. The global sugar balance, as a result, will swing to a surplus of 3.5 million tonnes, after two consecutive deficits in the 2015/16 and 2016/17 seasons.
Last month, Sucden forecast a surplus of about 3 million tonnes, boosted from previous expectations of about 1 to 2 million tonnes in excess supplies. In India, production is expected to reach 24.5 million tonnes in 2017/18 as a normal monsoon helps the Maharashtra cane region recover from the impact of drought. The European Union, meanwhile, is expected to produce 18.3 million tonnes of sugar in 2017/18 and exports are seen at around 2.7 million tonnes.
"Cold, dry weather was detrimental in the early phase of the growing season but has then become more beneficial," Sucden said, although it noted available sugar for export could be dampened if ethanol prices in the bloc remain firm. While sugar production in Brazil's key centre-south region is seen at 34.9 million tonnes, down from 35.6 million in 2016/17, Sucden said heavy rains last month will likely benefit the crop during the second half of the season.
It also said low ethanol prices mean "the sugar advantage has not disappeared despite the collapse in sugar prices." "Sugar mix will adjust lower in the current environment but not yet to a great extent," Sucden said. It also forecast Brazil's centre-south production at 36.5 million tonnes in 2018/19 in its first estimate for the region.