Giant Sugar Glut Erases Two Years Of Shortages On Asian Monsoon
Forget the sugar shortages of the past two years. This season’s glut is now forecast to be big enough to completely erase that.
Aided by favourable Asian rains, global supply will beat demand by 10.4 million metric tonnes in 2017-18, 26% more than the combined deficits in the past two seasons, according to researcher Green Pool Commodity Specialists.
The glut is forecast to be the biggest in five years and compares with an October estimate of 9.8 million tonnes.
"This year’s production response has undoubtedly been helped by a very good Asian monsoon, the results of which are only just beginning to emerge," the Brisbane, Australia-based researcher said in an emailed report. "There hasn’t been a global surplus in double figures since 2012-13."
The extra supply - also due to the end of output curbs in the European Union - helped send sugar futures traded in New York down 22% in 2017, the most since 2011.
The surplus estimated by Green Pool would push a measure of stockpiles relative to consumption to the highest in 15 years.
While consumption will increase 1.3%, in line with the average since 2008-09, production will jump 8.1%, Green Pool estimates.
In Asia, Thailand is set to reap a record crop with monsoon rains 20 to 30% higher than normal, and Indian output is forecast 300,000 tonnes higher than a local millers group’s estimate.
Supplies aren’t rising everywhere. Low sugar prices and a stronger ethanol market in Brazil will prompt millers in the top producer to use more cane to make the biofuel in the 2018-19 season that starts there in April.
Green Pool forecasts output in the centre south, the main growing area, to drop 8.7% year-on-year to 32.7 million tonnes, 3.8% below a previous estimate.
The researcher also cut its forecast for China’s 2017-18 production 2.1% to 10.3 million tonnes due to a smaller-than-expected planted area and noted that recent frosts highlight the risks of low temperatures brought about by the La Nina weather pattern.
"As always, there may be more surprises to come, but it still seems that risks on the global production balance are skewed slightly to the upside," Green Pool said.
"The evidence on consumption in the past few years leaves lingering doubts about its growth potential."