Global raw sugar prices remain around $0.26 a pound on fears of supply cuts, Trading Economics reported.
That’s close to a high of more than 11 years (since October 2011) of $0.27 a pound reached in late April.
The International Sugar Organization (ISO) in its May report sharply worsened its forecast for sugar oversupply in the 2022/23 crop year to 850,000 tons from 4.12 million tons a month earlier. This is due to a downward revision in expected supplies from key regions such as Europe, China, Thailand and India.
ISO estimates sugar production this year at 177.36 million tons, compared to the previous forecast of 180.43 million tons. Meanwhile, its global consumption will rise to 176.51 million tons.
“We’ve gone from an expected sugar surplus this year to no surplus at all,” believes Frank Jenkins, president of independent broker JSG Commodities.
Just a few months ago, he expected sugar production to exceed demand by about 4 to 6 million tons. “Because of crop losses in India, China, the European Union, Thailand and Mexico, those estimates have essentially dropped to a balance level, so there’s no real surplus to speak of,” said the expert, quoted by Barron’s.
“Unfavorable weather has become a much bigger problem for all agricultural products, including sugar,” believes Robin Shaw, an analyst at brokerage Marex. “The real enemy of sugar is drought,” and there are more of them around the world, he added.
Shaw predicts that sugar demand is likely to exceed production by 6 million to 7 million tons over the next three years. He previously expected a surplus of about 4 million tons this year.
To unfavorable weather, “you can add potential yield declines due to high fertilizer prices in the last couple of years, which is not helping the sugar market,” said John Stansfield, senior sugar analyst at consulting firm DNEXT Intelligence, John Stansfield.
About 80% of the world’s sugar production comes from sugar cane and 20% from beets, according to ISO. The largest producers are Brazil and India, as well as the EU and Thailand.
