Australian officials upgrade sugar price forecasts

19th Jun 2012, by Agrimoney
Australian farm officials lifted hopes for New York sugar prices despite flagging upbeat hopes for Brazilian output of the sweetener, putting the world on course for a third successive season of surplus.

Sugar output from Brazil, the top producer, will rise by some 2m tonnes to a record 40m tonnes in 2012-13, rebounding from a second successive season of decline, commodities bureau Abares said.

The forecast is considerably higher than estimates from the International Sugar Organization, of output of 37.2m tonnes, besides lower figures from other commentators, such as Macquarie, which use a marketing year starting in March rather than October.

Abares said its estimate "reflects a recovery from the poor crop in 2011-12 that resulted from adverse seasonal conditions, ageing cane plantings and crop diseases".

Market dynamics

However, while output will rise from Australia, China and Mexico too, Thailand's run of increasing production will stall, at 10.6m tonnes, and that in Europe and the former Soviet Union decline as beet yields return to average levels, after bumper harvests last year.

And although Indian output will increase by some 900,000 tonnes to 29m tonnes, a 10.4% jump in consumption will limit the impact of the uplift on international markets, leading in fact to a 1m-tonne drop to 2.5m tonnes in exports.

The bureau lifted to 20.0 cents a pound, from 17.8 cents a pound in March, its forecast for 2012-13 sugar prices as measured by the nearby New York raw sugar contract.

While a decline from the 22.5 cents a pound expected for 2011-12, the price "will still be favourable, and well above 11.4 cents a pound, the average over the 10 years to 2008-09".

The forecast is also in line with the New York futures curve.

Run of surpluses

Abares forecast world sugar output at 175.8m tonnes, a figure which, with consumption pegged at a little under 174m tonnes, implied a production surplus of 4.1m tonnes.

The figure would follow surpluses of 6.3m tonnes the previous season and 600,000 tonnes in 2010-11, on Abares estimates.

The International Sugar Organization has estimated the 2012-13 surplus at 4.0m tonnes.