ABARES: World 2017-18 Sugar Surplus Seen At 6 Mln Tonnes

MUMBAI (Commoditiescontrol) - Global sugar industry is estimated to have 6 million tonnes of surplus sugar supply during current season, 2017-18 (October to September), as per the Australian Bureau of Agriculture & Resource Economics and Sciences (ABARES) forecasts.

ABARES revised up its global surplus estimate by 1.19 lakh tonnes from earlier report. ABARES projected the excess sugar production of 48.1 lakh tonne globally in its September quarterly report this year.

Higher Global Sugar Production In 2017-18
ABARES released the December quarterly report on Tuesday, December 12. According to the report, global sugar production is estimated to increase by 8% from last season at 192 million tonnes. World sugar output is expected to rise due to higher sugar production in major sugar producing countries like, Brazil, the European Union, India, and Thailand etc.

In current sugar season of Brazil, during April 1st, 2017 to March 31st, 2018, sugar production of country is expected to reach at 40 million tonnes, a marginal rise of 1% year-on-year. The rise in sugar output is led by the expected rise in sugar mix in Brazil. Accordingly, the sugarcane allocation for sweetener production is estimated rise by 2% to 48% for ongoing season against 2016-17.

This increase of production mix is despite a November 2017 fall in cane allocation to sugar after Brazilian millers responded to relatively high sugar prices early in the 2016-17 season by allocating a larger volume of cane crush to sugar production.

Other major sugar producers also expected to have better sugar output in current sugar season 2017-18 (Oct-Sept). In previous report, ABARES projected the production of the European Union at 20 million tonnes in 2017-18, about 18% higher from last season. Sugar output is estimated to rise in the EU due to abolition of the sugar quota regime from next season.

While Thailand's, the second largest sugar exporter, is forecast to produce 12 million tonnes of sugar in ongoing season, up 18% from 2016-17. Sugar production of India, is also expected to increase by 11% to 27 million tonnes year-on-year. India is a world's second biggest sugar producer as well as world's largest sugar consumer.

Exports Will Rise On Higher Output
International sugar exports also estimated to lead by 3% rise in 2017-18 to 71 million tonnes from previous season. However, due to higher exports from Brazil and Thailand, which set to meet the stronger import demand from Algeria, Bangladesh, Indonesia, Malaysia, Nigeria, the United Arab Emirates and the United States.

Consumption Expected To Rise On Lower Price
Global sugar consumption during current season is also forecast to rise by around 2 percent to 186 million tonnes from 2016-17. Sugar consumption is expected to rise due to the lower rates, increased consumer incomes and rising populations. Consumption is forecast to increase in countries like, Brazil, China, India, Indonesia, Pakistan, the Russian Federation and Ukraine.

While sugar consumption is expected fall in the European Union and the United States because of long-term declines in the population growth rate, as well as trends in diet and nutrition policies driven by health concerns.

On other hand, relatively low sugar prices compared with those for alternative sweeteners such as high-fructose corn syrup and isoglucose are expected to encourage sugar consumption.

Increased Ending Stock Over Production-Consumption Gap
In 2017-18, sugar ending stocks are expected to increase by 6.3% to 76 million tonnes as a result of world sugar production rising at a faster rate from consumption. The world stocks-to-use ratio is also expected to increase at around 41%, up almost two percentage points from the previous year's 39% S/U ratio.

Global Sweetener Prices Will Continue Bearish Trend
World sugar prices are expected to remain weak as a result of increased world supply. While world raw sugar prices are forecast to decline by 19% during current sugar season.

The world benchmark contract for raw sugar contract no. 11, which trade on the Intercontinental Exchange (ICE), are forecast to decline by 19% in 2017-18 SS to an average price of US 14 cents per pound, a marginal upward revision from previous forecast of US 13 cents a pound in September.

The estimated slight rise in sugar futures are because of an unexpected slowdown in Brazilian sugar production. The drop in sugar production at Brazil was driven by a shift in sugarcane allocation from sugar to ethanol production in response to an increase in the relative price of ethanol. And better demand for the biofuel in the federal country.

World Sugar Balance (October-September)

#ABARES forecast *ABARES estimate

Sources: ABARES; Australian Bureau of Statistics; F.O. Licht, International Sugar and Sweetener Report, US Department of Agriculture

(By Commoditiescontrol Bureau: +91-22-40015532)