Rabobank in its third quarter sugar report estimates the global sugar surplus for 2013/14 at 5.4 million tonnes.
The surplus is not only the fourth consecutive surplus but also with rising stocks and an increasing stocks to consumption ratio.
Bad weather in Brazil could lead to a downward revision of Center South production and a possible increase in prices. Heavy rainfall in Russia could have a similar impact on the beet crop and also see a lift in prices.
Otherwise and in the absence of new information prices are expected to see upward resistance.
The Indian Sugar Association (ISMA) stated that the sugar industry may face a difficult year with opening stocks for the 2013/14 season that commenced in October standing at 8.5 million tonnes up from opening stocks of 6.2 million tonnes for the 2012/13 season equivalent to three months demand.
ISMA estimates production during the season to be 25 million tonnes and demand to be 23.5 million tonnes.
State support may be required by the industry. Payment arrears to farmers are also expected to increase.
Crushing is expected to start after announcement of the State Advisory Price (SAP). The sugar surplus is likely to result in mills looking to export sugar putting downward pressure on sugar prices.
A consensus of forecasts from leading market sources for sugar prices at the end of 2011 indicate a mean forecast for raw sugar of 25.19 cents per pound with the highest being 31 cents and the low forecast being 21.50 cents. The forecasts for white sugar at the end of 2011 indicate a mean of $670 per tonne with a high forecast of $800 and a low of $562. The forecast for the global sugar surplus for the 2011/12 season is a mean of 6.35 million tonnes with a high forecast of 9 million tonnes and a low of 3.5 million tonnes.
The forecasts indicate that sugar prices may be trending lower over the next few months. The forecasts were obtained in mid July 2011. A weaker U.S. dollar and UNICA announcing in July that Brazil’s center south sugar cane crop is likely to be down by over 6% or 35.5m tonnes due to bad weather and older ratoons resulted in sugar prices soaring with white sugar reaching a record $890 per tonne and raw sugar hitting a 4 month high of 31.33 cents per pound.
Sugar production is expected to decrease by slightly more than 2 million tonnes with slightly less sugar than expected being diverted to ethanol production due to higher margins from current sugar prices.
Despite tight supplies this year next year may see world supply turn into a surplus exceeding demand, assuming the weather holds no surprises in the largest sugar growing countries. Sugar futures prices fell on Friday on the news of a potential surplus next year.