Massive global sugar surpluses this year and next year will keep world raw sugar prices under pressure “for the foreseeable future,” said Ben Fessler, market analyst, international trade and development, C. Czarnikow Sugar, Inc., Miami.

Mr. Fessler forecast a global sugar surplus of 20 million tonnes in 2017-18 (this year) and of 15.9 million tonnes in 2018-19 at the International Sweetener Symposium, sponsored by the American Sugar Alliance, Aug. 6 in Traverse City.

As a result of the forecast large surpluses, which follow two years of global sugar deficits, world raw sugar prices “will remain depressed for the foreseeable future,” Mr. Fessler said.

He said the surplus mainly was due to soaring production in India, forecast at about 32 million tonnes in 2017-18, up about 60% from a drought-reduced crop of around 20 million tonnes in 2016-17. Additional government incentives to Indian cane growers is expected to further boost production to around 35 million tonnes in 2018-19 due to higher planted area, Mr. Fessler said.

India’s attempt to export 2 million tonnes of sugar (as mandated by the government) onto the world market has not materialized because government-mandated minimum domestic prices are above depressed global prices, Mr. Fessler said. India was rumored to be working on a deal to export 1.5 million tonnes of sugar to China over the remainder of this year and next year, as well as a plan to increase exports to Indonesia, he noted. Both prospects were unlikely, he said. Barring an uptick in exports, India’s sugar ending stocks could go from 1.5 million tonnes in 2016-17 to 8 million to 9 million tonnes this year to about 18 million tonnes in 2018-19, he said.

Large 2017-18 crops in Thailand (up about 50% from 2016-17) and in the European unio (up about 27%) and consequently higher exports also contributed to the global surplus, Mr. Fessler said. He expects Thailand’s production to be a record 15 million tonnes this year and slightly higher next year, and E.U. production of 21 million tonnes this year (a 20-year record) and around 19.5 million tonnes next year.

Those increases have more than offset sharply lower sugar production and export potential from Brazil, the world’s largest sugar producer and exporter. Brazil is expected to produce about 28.6 million tonnes of sugar in 2018-19 (its current marketing year that began April 1), down sharply from 36 million tonnes last year. The decrease is due to drought in the main producing region, lower crop inputs due to low prices and sharply higher use of sugar to produce ethanol due to favorable energy prices, Mr. Fessler said. He said current returns were about 1.1c a lb better for ethanol than for sugar.

Mr. Fessler said global raw sugar prices also will be influenced by speculative activity in New York ICE raw sugar futures, which currently are in a high net short position, producer hedging and China’s domestic and export sugar policies. There currently are more bearish than bullish factors in the global sugar market, he said.

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