February 2, 2015
Agrimoney
World sugar output is to fall for a third successive season, and at an accelerated rate, as the impact of lower prices feeds through into mill closures, Platts Kingsman said, forecasting a return to a significant world production deficit.
The influential analysis group, in its first forecast for 2015-16, estimated world production falling 5.25m tonnes behind consumption – the biggest shortfall in six seasons.
The forecast reflected an estimate that output will fall 2m tonnes to 177.10m tonnes – extending a run of declines from a 2012-13 peak of 180.67m tonnes, and with the decline attributed to the pressure on producers' margins from persistently lower prices.
Fallout from weak sugar prices
"Despite the efforts of many governments to protect rural income, lower sugar prices have affected mills' profits and farmers' revenues," Kingsman said.
"The direct consequence of this has been the bankruptcy of mills, for example in Brazil, a build-up in cane arrears, for example in India and Pakistan, lower renovation rates and field inputs, for example in Mexico and Brazil, lower acreages, for example in the European Union."
Consumption, meanwhile, was seen growing by 1.7%, albeit expansion a little lower than trend rate, a reflection of the lower oil price.
Many oil-exporting nations, such as Nigeria and Russia, are major buyers for sugar, for which their appetite may be curtailed by the damage to their economy from lower crude values.
Kingsman vs Green Pool
The deficit envisaged by Kingsman would follow four years of surplus totalling more than 30m tonnes, following in the current season by a negligible deficit, of some 120,000 tonnes according to the Swiss-based group.
And it follows a forecast last week by Australia-based analysis group Green Pool of a shortfall of 5.02m tonnes for 2015-16 – although caution is required when comparing estimates from different commentators.
Kingsman's estimate is based on a strict October-to-September season, while Green Pool uses a mixture of local marketing years. The marketing year in Brazil, for instance, the top sugar producing country, runs from April-to-March.
White sugar premium
The forecasts come as the sugar trade is focusing on the Dubai sugar conference, which runs until February 3.
Also at the conference on Sunday, Jamal Al Ghurair, managing director of Dubai's important Al Khaleej Sugar Refinery, said that the premium of white sugar over raw sugar was likely to remain subdued this, at $50-60 a tonne.
"Overcapacity of refining will keep pushing the white premium down," he said, in a talk which revealed that Al Khaleej has 1.5m tonnes of raw sugar either stockpiled or en route to the refinery.
Mr Ghurair underlined a need for consolidation among refiners, to tackle the overcapacity which is depressing profitability.
"At the moment we have to survive, no expansion plans," he said.