Raw sugar prices seen falling, global surpluses expected

LONDON: Raw sugar futures look set to end this year more than 8% below current levels with a marginal global surplus this season seen widening slightly in 2021/22, a Reuters poll of 11 traders and analysts showed on Monday.

Prices were seen ending 2021 at 14.5 cents per lb, down 8.4% from Friday's close and 6.4% below levels at the end of 2020, according to the median forecast.

White sugar prices were seen ending 2021 at $407.30 per tonne, down 10.7% from Friday's close and 3.2% below levels at the end of 2020.

The poll consensus was for a global surplus of 0.5 million tonnes for the 2020/21 season followed by another surplus of 2.8 million tonnes in 2021/22.

Raw sugar prices climbed by 15% last year with the rise seen contributing to record production in 2020/21 of around 38 million tonnes in the key Centre-South region on Brazil.

There was a shift to using more cane to produce sugar rather than ethanol in the season, driven partly by weak demand for the biofuel linked to measures to slow the spread of COVID-19.

Poll participants had a median forecast of 36.2 million tonnes for Centre-South Brazil sugar production in 2021/22, below this season's record but still a strong level.

The proportion of cane used for sugar production was seen at 46% in 2021/22, in line with this season and well above the 34% used in 2019/20.

"The state of fuel demand globally and its impact on oil prices will feed back to ethanol values and the Brazilian sugar mix. Lacklustre demand for gasoline and ethanol in Brazil is leading to millers getting the signal to maximise sugar production," Group Sopex analyst John Stansfield said.

India's sugar production was seen edging higher in 2021/22 to 33 million tonnes, up from 32.4 million in 2020/21, according the poll's median forecast.

Participants also cited a potential slowdown in buying by China as contributing to a possible decline in prices.

They noted the outlook for sugar consumption in the upcoming season was particularly difficult to predict with a recovery in out-of-home consumption linked partly to the effectiveness and extent of COVID-19 vaccination programmes across the globe.