Sugar prices to rise as Indian output cut tightens supplies

Fawad Maqsood July 24, 2019

LONDON: World sugar prices are forecast to rise by the end of this year with a global deficit projected for the 2019/20 season, a Reuters survey of 13 analysts and traders showed on Wednesday.

Raw sugar prices were expected to end the year at 13.80 cents per lb, up 15% from Tuesday’s close, according to the median forecast of responses.

The world sugar balance was seen switching to a deficit of 2.95 million tonnes in 2019/20 from a surplus of 2.50 million in 2018/19.

The shift was partly driven by a forecast fall in India’s production to 28.50 million tonnes in 2019/20 from 33.00 million in 2018/19, according to the poll.

“We expect the sharp reduction in Indian production in 2019/20 to start the recovery in prices,” said John Stansfield, a sugar analyst at Group Sopex.

“A very poor crop in Maharashtra, triggered by a poor monsoon in 2018 that reduced replanting, will start the process of firming domestic prices in India. Higher domestic prices will reduce the volume of exports onto the world market.”

Supplies are also likely to be curbed by heavy use of cane to make ethanol rather than sugar in Centre-South Brazil. The poll had a median forecast that 35.95pc of the cane would be used to make sugar in that region in the 2019/20 season.

The proportion would be similar to 2018/19 when 35.2pc was used to make sugar. It would, however, be well below the prior two seasons, with sugar accounting for 46.5pc in 2017/18 and 46.3pc in 2016/17.

“Ethanol is paying better than sugar. Prices (for sugar) will need to improve for Brazil to change the mix,” one poll participant said.

White sugar prices were expected to end the year at $350 per tonne, up 10% from Tuesday’s close.

Copyright Reuters, 2019

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