Sugar surplus forecast cut at Kingsman as Indian output slides

The global sugar surplus for the coming season will be 5.9 per cent smaller than first estimated as output falls in India, the world’s second-biggest producer, according to Kingsman SA.

Supplies will exceed demand by 8.7 million tonnes in the 2012-13 season starting in October, below a June forecast of 9.3 million tonnes, the Lausanne, Switzerland-based researcher and broker said in report. That follows a surplus of 10.1 million tonnes in the current period. On a national crop- year basis, starting when harvests are actually collected in each country, the projected surplus fell 17 per cent to about 6.7 million tonnes, according to the report.

The surplus for the year from October exceeds the national crop-year estimate because it takes into account part of the 2013-14 crop in Brazil that starts in April, said founder Jonathan Kingsman. Higher prices increased the incentive to produce in countries including China, Mexico and Russia. Bigger crops there will compensate for falling output in India. Sugar reached a 30-year high of 36.08 cents a pound in New York in February 2011 and has since dropped 45 per cent, while remaining above the 10-year average of 14.6 cents.

“World prices have been high and this has encouraged production in a whole lot of countries outside of Brazil,” Kingsman, who traded sugar for more than three decades, said by phone today. “Russia and China have been building their domestic production and replacing needs for imports. The outlook is not particularly good, but we’ve been caught before by the weather, when we saw the rally from 19 cents to 24 cents a pound, so we are still susceptible to the weather.”

Indian output
Dry weather in India, the world’s biggest sugar consumer, will cut production to 24.25 million tonnes in 2012-13, below a previous forecast of 25.5 million tonnes, Kingsman said. The country produced 26.2 million tonnes in 2011-12. The monsoon, which brings about 70 per cent of national rainfall, has been 12 per cent below normal since June 1, according to the India Meteorological Department. That compares with a deficit of 29 per cent at the end of June.

“Although the monsoon rains in India have picked up in the second half of August, large cane areas in central Maharashtra have been damaged beyond recovery,” Kingsman said in the report.

China’s crop will rise to 12.75 million tonnes in 2012-13 from 11.5 million tonnes this season, Kingsman estimated, saying output may reach 13.5 million tonnes if favourable weather continues. The nation’s imports are unlikely to surpass the quota of 1.94 million tonnes in calendar year 2013, he said.