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Sugar Deficit Forecast Raised By Sucden As Drought Hits Growers

Published on Sep 30 2016 11:20 AM in Events tagged: Trending Posts / India / Sugar / Brazil / Sucden

Sugar Deficit Forecast Raised By Sucden As Drought Hits Growers

One of the largest traders in the sugar market said world sugar output in the next crop season will trail demand by more than previously forecast as adverse growing conditions threaten yields in Brazil and India, the biggest growers.

The deficit in the 2016-17 season, which starts Oct. 1 in most countries, will be 4 million metric tons, Paris-based Sucden & Denrees said Thursday, up from a July projection of 3 million.

India’s crop will drop by about 2 million tons to 23.2 million, creating a domestic shortfall of 2.7 million that may spur the country to import, Sucden said in an e-mailed report.

While Brazil’s Center-South region could produce a record 35.4 million tons, according to the trader, some forecasters point to a rainy October curbing the sucrose content of the sugar-cane. That could collapse yields, raising concern about how much sugar-cane is available for processing, and possibly delay the start of next year’s harvest. Harsh weather in the country’s northeastern sections “means more downside may be on the horizon there.”

“As always, weather conditions going forward can influence sugar production and can therefore bring some volatility,” Sucden said. “Also, while funds posted a new record long recently and seem to be willing to persist on the long side, it cannot be ruled out that a macro event might, at some point, trigger a sell-off.”

Production Recovery

Raw sugar surged 53 percent this year on ICE Futures U.S. in New York on expectations for two straight world shortfalls. Sucden’s deficit estimates are lower than those of some other analysts, including Sao Paulo-based researcher Datagro; Kinsgman, a unit of S&P Global Platts, and the London-based International Sugar Organization.

Overall, global production should rebound from its 2015-16 low by about 6.5 million tons, which wouldn’t be enough to offset the previous deficit of 5 million tons and annual consumption growth of 2.8 million, according to Sucden.

“The ample supply environment prevailing so far is therefore set to tighten during the first quarter,” Sucden said in the report. “Lower rainfall in August/September was a reminder that weather risks still exist” for Indian crops.

Thailand’s output will be unchanged at 9.7 million tons in the 2016-17 season, while the European Union and China will see gains, according to Sucden’s report.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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