Abares Slashes World Sugar Price Hopes, Citing Raised Output Ideas

(Agrimoney) –  Abares slashed its forecast for sugar prices to a three-year low as it ditched expectations of a further drop in world stocks of the sweetener next season, despite a dent to domestic production hopes from Tropical Cyclone Debbie.

The official Australian commodities bureau forecast New York raw sugar futures averaging 15.0 cents a pound in 2017-18, on an October-to-September basis.

That well below an estimate of 22.0 cents a pound made three months ago, although suggests some recovery in prices from current levels, with the futures curve currently suggesting an average price of roughly 14.4 cents a pound next season.

The “downward revision… reflects a greater increase in supply expected for 2017–18, resulting in an increase in world sugar stocks for the first time in three years”, Abares said.

‘Improved production methods’

Indeed, it ditched expectations of a 1.1m-tonne drawdown in world sugar inventories over the season – now seeing them rise by 3.0m tonnes to 71.1m tonnes.

The forecast reflected an upgrade of 5.9m tonnes to 189.0m tonnes in global sugar production, “reflecting a greater-than-expected expansion in area harvested in response to favourable sugar prices in 2016–17.

“Sugar production from cane in China, India and Thailand, and from beet in the European Union, is expected to increase in 2017–18.”

Output in China, the top sugar-importing country, will grow by some 1.6m tonnes to 12.5m tonnes, helped by “improved production methods and the adoption of new sugarcane varieties”, while that in top consumer India will rebound by about 2.4m tonnes to 26m tonnes.

Production in the European Union will grow by well over 2m tonnes to 19.2m tonnes, helped by the ditching in October of the bloc’s quota system, with member states “expected to increase beet planting as a result”.

‘Damaged cane’

The upgrades more than offset a 1.8m-tonne upgrade, to 186.0m tonnes, in the estimate for world consumption in 2017-18, a revision made to reflect the boost to demand from lower prices.

The increased output hopes also dwarfed a 340,000-tonne downgrade to 4.82m tonnes in the estimate for Australian production in 2017-18, following damage in March from Tropical Cyclone Debbie, which struck large parts of the country’s eastern cane-growing hub.

“The cyclone damaged cane in the Burdekin, Mackay and Proserpine sugar-growing regions,” which were between them responsible for 24% of Australian sugar output in 2016-17.

The forecast for Australian sugar exports in 2017-18 was cut by 230,000 tonnes to 4.82m tonnes to reflect the lower production volumes, leaving the figure only some 12,000 tonnes higher year on year.