Green Pool sees return to sugar deficit in 2015-16

(Agrimoney) – Green Pool, in its first estimate for 2015-16, forecast a world sugar production deficit of 4.58m tonnes, citing the prospect of lower Brazilian output – even as it upgraded the country’s hopes for this season.

The Australian-based analysis group said that the “moderate” sugar output shortfall – the first deficit in six seasons – reflected largely an expectation that production in Brazil’s key Centre South region will fall to 30.7m tonnes next season.

The decline to what would be a six-year low would defy expectations of a larger cane harvest in the Centre South, responsible for some 90% of Brazil’s output, with volumes set to rise 10m tonnes to 568m tonnes.

But ethanol would “gain a greater share” of the cane harvest – a comment which echoes a forecast from Rabobank this week that it would win 57% of Centre South cane, thanks to the increased blend of the biofuel into gasoline  – up 2.5 points to 27.5% – that Brazil has mandated.

Green Pool vs ISO

Nonetheless, Green Pool is significantly more downbeat on Centre South sugar output, with Rabobank pegging it at 31.8m tonnes in 2015-16, down only 100,000 tonnes on its estimates.

Green Pool also sees a bigger world sugar production shortfall than the International Sugar Organization, one of the few other commentators to issue a full forecast next season.

The ISO signalling increased sugar production “in a number of countries where bad weather has significantly reduced or will seriously affect output during 2014-15”, but the prospect of weaker European volumes, said that a “deficit of about 2m-2.5m tonnes comes into view”.

It should be noted that Green Pool and ISO data are not strictly comparable, with the former using local crop years in compiling its data, while the ISO relies strictly on an October-to-September season.

‘Pessimism overdone’

Green Pool’s downbeat Brazilian sugar hopes for 2015-16 came despite increased expectations for the current season.

The group nudged higher by 700,000 tonnes to 32m tonnes its forecast for Centre South sugar output, reflecting a 6m-tonne increase to 558m tonnes in its estimate for the cane harvest.

“Some more pessimistic views on the Centre South Brazil crop now seem overdone, given the harvest there continues to roll on,” Green Pool said, if highlighting the setback to the ethanol sector from fuel policy changes which “have disappointed”.

The government of Dilma Rousseff, relected president in October, permitted only a 3% rise in wholesale gasoline prices, lower than the increase expected by most analysts.

The Centre South harvest had been expected to come to a sharp and premature end, as drought this year cut cane yields but allowed speedy harvesting, although such predictions appear to have been only party fulfilled.

Centre South crusher Sao Martinho said last week that its cane volumes had, at 18.7m tonnes, fallen 4.9% short of initial expectations, “due to the drought”.

Indian upgrade

Green Pool ditched ideas for a 107,000-tonne world sugar production deficit in 2014-15, instead seeing a surplus of 360,000 tonnes.

The revision reflected in part the changes to Brazilian estimates, but also an upgrade to the forecast for output from India, the second-ranked producer.