Global Sugar Surplus Seen by Green Pool Falling 70% in 2014-15

(Bloomberg) – The global sugar surplus will fall 70 percent next season as consumption rises “quite strongly” and production begins to decline after three years of lower prices, according to Green Pool Commodity Specialists.

World sugar supply will exceed demand by 1.6 million metric tons in the 2014-15 season that starts in October in most countries, the Brisbane, Australia-based researcher said in its first assessment of the new marketing year. That compares with a surplus of 5.5 million tons in 2013-14. Raw sugar futures traded on ICE Futures  U.S. in New York fell in the past three years, the longest losing streak since 1992.

“Because of lower prices, we think consumption will kick along a little,” Tom McNeill, a director at Green Pool, said by phone today. “At this stage, we are not projecting a sharp decline in production. That could come further down the track.”

Global sugar production will decline 0.1 percent to 181.3 million tons next season, while consumption rises 2.1 percent to 178.6 million tons, Green Pool said in an e-mailed report. Low prices at the end of 2013 and beginning of 2014 didn’t last long enough to discourage plantings for 2014-15, it said.

Sugar prices rallied 5.7 percent in the past week on speculation dry weather in Brazil, the world’s largest producer, will cut output for the 2014-15 harvest that starts there in April. Sugar beet growers will begin sowing in the next one to two months and price gains will encourage plantings, according to the report.

Brazil’s Production

Production in Brazil’s center south, the country’s main growing region, will be 36.3 million tons, according to Green Pool. That’s little changed from 36.9 million tons a year earlier. In India, the second-biggest grower, output will climb to 26.3 million tons from 25.9 million tons a year earlier.

“We don’t expect a big drop in Brazil even if dry weather does continue,” McNeill said. “A bit of dry weather, what it will probably do is that there will be less tons of cane and more tons of sugar because the ATR usually rises in drier conditions,” he said, referring to the cane’s sugar content.

Green Pool raised its surplus estimate for 2013-14 from 5.05 million tons in December as the production forecast was increased about 525,000 tons to 175.03 million tons, according to the report. While prices will probably get a boost for now from speculation about dry weather in Brazil and delays to approving subsidies to boost exports in India, the South Asian nation’s excess stockpiles “won’t go away,” Green Pool said.