Since February, the global sugar market’s value has declined significantly, owing to a sharp increase in sugar availability, reports the International Sugar Organisation (ISO) in its ‘Quarterly Market Outlook’, released in May.
The decline in value is attrib- uted to a record harvest in Thai-land, the long-awaited reappearance of India as an exporter and the bulk production from the new season’s crop, in Brazil.
The International Sugar Agreement daily price decreased from a 30-year high of 32.57c/lb, at the start of February, to 20.89c/lb, on May 6.
Meanwhile, white sugar prices have followed a similar trend, with the ISO White Sugar Price Index decreasing from 37.76c/lb, on February 2, to 25.99c/lb, on May 6.
“Similar to raw sugar, white sugar values have lost all the gains made during the 2010/11 price peak,” says the ISO.
However, the organisation’s third revision of the 2010/11 world sugar balance foresees a statisti- cal surplus of about 800 000 t of sugar compared with the 196 000 t expected in February, as a result of the recent crop developments in Thailand, which is expected to produce over 9.5-million tons in the 2010/11 crop cycle.
“Without the significant and unforeseen increase in sugar availability in Thailand, the 2010/11 world balance would have declined by more than one-million tons. The third revision of the world sugar balance also sees world production growing to a record 167-million tons, raw value, which is an increase of 8.9-million tons or 5.67% from the last season,” says the ISO.
World consumption is esti- mated at about 166-million tons, raw value, representing an increase of 3.6-million tons or 2.19% from the previous season.
However, consumption is still expected to grow at a slower rate than the ten-year average of 2.49%. From the start of the season, the ISO has warned that low stocks would support market values despite a modest statistical surplus predicted throughout the season.
No stock rebuilding is foreseen for the current season. After two seasons of large deficits, the stocks:consumption ratio has fallen to its lowest level in more than 20 years. The ratio is expected to decline further to 33.79% in 2010/11 from 34.56% in the deficit season of 2009/10.
However, the new forecast of the trade balance does not indi- cate any further tightness in sugar availability in 2010/11. Indeed, world export availability, which currently stands at about 51.29-million tons, is expected to exceed import demand of 50.42-million tons by 865 000 t, compared with the less than 200 000 t projected in February.
Meanwhile, market attention is increasingly focusing on prospects for the upcoming 2011/12 season. The ISO’s tentative projections indicate that the upcoming crop cycle may bring a significantly higher statistical surplus exceeding three-million tons, putting further pressure on world market prices.
“It is also important to note that stocks are still low and any cur- rently unforeseen weather- induced production shortfall or logistical bottlenecks of key expor- ters, similar to those witnessed in the middle of 2010 in Brazil, may, at least temporarily, result in the return of extreme volatility,” the international body warns.
Brazil Cane Supply
The 2011/12 cane harvest in Brazil’s dominant cane-growing Centre-South region has had a promising start with 200 of the region’s 335 mills already crushing cane at the end of April.
The 2011/12 cane harvest in Brazil’s dominant cane-growing Centre-South region has had a promising start with 200 of the region’s 335 mills already crushing cane at the end of April.
“The decision to bring the harvest forward followed an agreement between the local industry and government after the cost of anhydrous ethanol increased significantly from mid-March. However, there is little hope that cane output will be much higher in 2011/12 than last year,” the ISO explains.
This year, the organisation expects cane supply in the Centre-South to only increase by about 11-million tons to 568-million tons, which is short of the average growth of 50-million tons experienced over the past four years.
Agricultural yields are expected to suffer, owing to a further ageing of the cane, an increase in harvest mechanisation and a lower share of leftover cane.
“Events to watch for in future are investment plans by international trading houses and oil groups, exchange rate movements and production costs, as well as profitability of cane growing in both absolute terms and in comparison to other crops. “Demand drivers are also important, particularly the lower activity in ethanol markets, which could ensure continued increased allocation of cane to sugar,” says the ISO.
This year, growth in global ethanol fuel production and consumption is forecast to decline to less than 4%, reaching around 89-billion litres and 88-billion litres respectively. This is well below the average yearly growth of 21% recorded over the past five years.
This year, growth in global ethanol fuel production and consumption is forecast to decline to less than 4%, reaching around 89-billion litres and 88-billion litres respectively. This is well below the average yearly growth of 21% recorded over the past five years.
Ethanol producers in the US are constrained by the inevitable delays in starting widespread sales of E15 (a blend of petrol and ethanol), while Brazil’s ethanol output is expected to decline as millers continue to focus on domestic and international sugar markets.
“Further, India’s record molasses production and government set price for fuel ethanol are expected to lead to a doubling of its ethanol output. Consumption in the US remains constrained by legislative hurdles, while gains in Brazil are forecast to be modest with possible high prices preventing an increase in hydrous ethanol offtake,” notes the ISO.
A primary source of global consumption growth is the rising inclusion obligations in Europe, as well as significant increases anticipated in smaller sugar consumers, such as Argentina, Australia, Canada, Colombia and India.
Meanwhile, no increase in glo- bal fuel ethanol trade, from the low 2010 level of 2.3-billion litres, is expected and Brazil’s exports are likely to remain relatively weak until international values rise to match returns from sugar.
Alternative Sweeteners Decline
The production of high-fructose corn syrup (HFCS) in the US is expected to decrease slightly by 1% this year, after shrinking by 1.6% last year.
The production of high-fructose corn syrup (HFCS) in the US is expected to decrease slightly by 1% this year, after shrinking by 1.6% last year.
The decline in HFCS consumption, along with rising sugar consumption, is a result of consumers moving away from carbonated soft drinks (traditionally sweetened with HFCS) to alternatives, such as energy drinks, functional waters and juices, compounded by adverse publicity over HFCS consumption and human health, explains the ISO.
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