Global output of raw sugar will fall short of demand by about 900,000 tonnes in the 12 months from October compared with a glut of 1.4 million tonnes in 2013-14, the bank said in a quarterly report. While it is too early to be certain that the market is passing an inflection point, there is now a trend toward higher prices, albeit a slow one, it said.
Raw sugar retreated more than 50% from a 30-year high in 2011 as world supplies consistently surpassed demand. Global output will lag behind consumption by about 500,000 tonnes in 2014-15 as production stabilises, London-based Czarnikow forecast last week. The degree of tightening depends on how a forecast El Niño weather event develops, Rabobank said.
“We are likely to see the market swing back into deficit, mainly because of a reduced production in Centre-South Brazil and Thailand, and increasing global consumption,” Tom McNeill, director at Green Pool Commodity Specialists, a Brisbane-based researcher, said in an e-mail today. Brazil and Thailand are the world’s two largest exporters of the sweetener.
Raw sugar for October delivery gained as much as 0.8% to 17.2 cents a pound on ICE Futures US, and was at 17.14 cents at 3.40pm in Singapore. Most-active prices rose 4.5% this year, rebounding from a third year of losses in 2013 that capped the longest run of annual declines since 1992.Thai supply
Raw supply from Thailand may drop in 2014-15, while output in India, the world’s second-biggest producer, is set to be similar to 24.1 million tonnes in 2013-14, Rabobank said in the report. Forecast cane production from Centre-South, Brazil’s main producing region, was seen at 570 million tonnes, it said.
El Niño, which can bring drought to the Asia-Pacific region and heavier-than-usual rains to South America, is likely to develop by Australia’s spring, which starts in September, the Melbourne-based Bureau of Meteorology said on July 1. There’s at least a 70% chance of the event this year, it said.
Global demand will exceed production by 2.1 million tonnes in the crop year that starts in October, up from a previous estimate of a 239,000-tonne shortage, Lausanne, Switzerland Kingsman forecast this month. Green Pool’s McNeill predicted a deficit of 1.17 million tonnes in 2014-15.
“The prospect of a deficit in 2014-15 suggests that low sugar prices have gradually worked their way through to farmers’ and millers’ decisions on, for example, planting and investment, at least in some parts of the world,” Rabobank said.