Sugar price hangs on output in India

Global supplies will outpace demand by about 1 to 3 mt in 2017-18

Sugar traders are bracing for a wild ride. While most analysts forecast a return to surplus in the 2017-18 season that starts in October, many are considering “best case scenarios,” Michael Gelchie, a trading director at Sucres et Denrees SA, or Sucden, said at the Dubai Sugar Conference on Sunday. With global stockpiles forecast to fall to their lowest since 2011-12, there’s little room for weather disruptions that could hurt crops.

Sugar futures in New York jumped 28 per cent last year, the most since 2009 and the best performing agricultural material in the Bloomberg Commodity Index. Prices climbed as El Nino-induced drought hurt output in India, prompting forecasts that the world’s second-biggest producer will import the sweetener. Global supplies will outpace demand by about one million to three million tonnes in 2017-18, according to estimates from Tropical Research Services, FO Licht GmbH and Kingsman, a unit of S&P Global Platts.

“If the stars align, there will be a surplus; but if something goes wrong, it will be tight because inventories are low,” Marcelo de Andrade, global head of sugar at Cofco Agri, a unit of China’s largest food company, said in an interview in Dubai. “It’s never been so hard to forecast as it is now.”

Analysts are counting on a rebound in Asian output, a bigger crop in the European Union and stable production in top grower Brazil. But with about eight months to go before the start of the new season, a lot could go wrong. Brazil needs to receive more rain through at least March and then have dry weather to facilitate harvesting from April, according to Cofco’s de Andrade and Paulo Roberto de Souza, chief executive officer at Copersucar SA, a Sao Paulo-based company with 35 associate mills.

Bloomberg