Global Sugar Surplus Seen by Kingsman Extending Into Fifth Year

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gsr36The global sugar surplus will extend to a fifth year as government support and weakening currencies in producing countries partly make up for lower prices, Kingsman SA said in a first estimate for 2014-15.

Global production will be 2.1 million metric tons higher than consumption in the 12 months starting Oct. 1, according to a forecast by the Lausanne, Switzerland-based unit of McGraw Hill Financial Inc. (MHFI)’s Platts. That’s down from excess supplies of 2.3 million tons a year earlier. Sugar surpluses prevailed since 2010-11 as farmers from Brazil to Australia boosted output after prices reached a 30-year high in 2011. Futures declined 56 percent since then.

“If you look at production globally, it’s still increasing,” Fabienne Pointier, an analyst at Kingsman, said by phone from Dubai, where the company’s annual four-day conference is being held. “Beet producers, especially in Europe, Russia and Ukraine, still haven’t received the necessary price signals to slow plantings while government support and depreciating currencies in cane-producing countries are helping to partly offset lower prices.”

The Brazilian real depreciated 13 percent against the U.S. dollar last year and the Indian rupee slid 11 percent, helping compensate the world’s top and second-largest producers, which sell their sweetener in dollars, for lower prices. Raw sugar futures fell in the past three years on ICE Futures U.S., the longest losing streak in more than two decades.

Crop Years

Global sugar production will climb to 181 million tons in 2014-15 from 177.7 million tons a year earlier, according to Kingsman. Consumption will advance 2 percent to 178.96 million tons. On a national crop year-basis, which starts when each of the producing nations begins harvesting, the 2014-15 surplus will be 49 percent lower at 2 million tons, Kingsman estimates.

Millers in Brazil’s center south, the country’s main growing region, will process 595 million tons of cane in the 2014-15 season that starts there at about April and make 34.5 million tons of sugar, according to the report. That’s little changed from the 594.7 million tons of cane and 34.2 million tons of sugar produced from the start of the 2013-14 season through to Jan. 15, when most millers had already ended the season, data from industry group Unica show.

Sugar rose in the past two weeks on speculation hot and dry weather in Brazil will cut output. While dryness may result in lower yields, losses won’t necessarily mean millers process less because cane availability is ample, Kingsman said. The researcher may have to cut its production forecast if heavy rainfall foreseen for April, when the harvest starts, materializes, it said.

Indian Production

Production in India will be 25.45 million tons, unchanged from a year earlier, while millers in Thailand, the second-biggest exporter, will boost output to a record 12.2 million tons from 11.7 million tons this season, according to Kingsman. In Australia, the third-largest shipper, millers will make 4.4 million tons, unchanged from a year earlier.

Countries that make sugar from beets including the European Union, Ukraine and Russia, where combined production is forecast to drop by 2 million tons in 2013-14, will boost output next season, Kingsman estimated.

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