The world market will have a surplus of 1.3 million tonnes in the 12 months starting October, a fifth year of glut, and a small deficit in the following year, said Lindsay Jolly, the senior economist. The oversupply will be about 4 million tonnes this season, he said in an interview in Indonesia yesterday.
Futures have plunged more than 50% in New York from a three-decade high in 2011 as global harvests outpaced demand, boosting stockpiles that will reach a record 45.5 million tonnes at the end of September, according to the US Department of Agriculture. Any potential price recovery because of output declines next season may be muted by huge stockpiles, the London-based ISO said in a report yesterday.
"Even with a deficit it won't really mean much until you do get that statistical deficit translating into a physical deficit," Mr Jolly said at a conference in Yogyakarta. "I think you are going to need at least a 3-4 million tonne deficit" for prices to move significantly, he said.
The contract for delivery in October rose 2.3% to settle at 15.71 cents a pound on ICE Futures US in New York yesterday. Prices reached 36.08 cents in February 2011. Raw sugar reached 22 cents in 12 months as prices less than 17 cents encourage buyers to build inventories, according to UBS AG.
To expand the deficit and ensure a recovery in prices, supply declines will be needed from top exporters Brazil, Thailand and Australia, Mr Jolly said. A stronger Brazilian real and higher gasoline prices in the world's second-biggest ethanol producer may help spur shortages, he said.
Demand may increase among importers such as Indonesia, which is set to be the world's biggest buyer, Mr Jolly said. The country may buy 500,000 tonnes more raw sugar next year, up from 2.8 million tonnes this year, he said. The Indonesian Sugar Refiners Association estimates imports by processors may reach 3.6 million tonnes in 2015, up 29% from this year.
World output will probably advance 0.6% to 183.8 million tonnes in 2014-2015 and consumption may rise 2.1% to 182.4 million tons, the ISO said yesterday. Import demand will probably fall 1.8% to 56.6 million tons, it said.