Ben Eastick Written by Ben Eastick

Global Sugar Market Report

Market Position
Following four years of production deficits and stock drawdown a global surplus of over 9 million tonnes is estimated for the 2011/12 season. Increased supply and reduced demand as a result of excellent harvests in EU, India, Russia and Thailand will result in lower prices on the international market in the first quarter of 2012. Consequently China, Indonesia and the US may decide to buy to rebuild domestic stock levels which would see prices raise again in the following quarter. The continuing Euro zone sovereign debt crisis will result in volatility on the international sugar markets. Extreme weather patterns over the last two seasons caused by La Niña/El Niño effect are unlikely to occur for a third successive season, which should lead to average temperatures and result in the 2012/13 season producing a production surplus and pricing stability.

Europe
Good weather over the European summer and autumn boosted sucrose yields and helped harvesting. The EU forecast for the beet crop is estimated at 18.2 million tonnes, close to 3 million tonnes higher than last year. Around 1 million tonnes will be produced out of quota which will result in a reduction in spring beet planting as out of quota sugar has to be carried forward to the following season. An increase in the use of sugar beet in the production of ethanol is likely and part of the CAP reform may see a re-introduction of the Irish sugar beet industry in the production of ethanol rather than sugar.

Brazil
Yields during the second half of the harvest continued the decline in the centre south and resulted in the allocation to sugar in preference to ethanol being the highest for the last five years. The north east region improved slightly increasing estimates for the Brazilian production to 38.5 million tonnes, down 2.5 mln tonnes on 2010/11 season. The focus is now on the 2012/13 crop with the replanting of the ageing cane which will see the planting of fast growing varieties allowing for harvesting in 12 months as opposed to the traditional varieties that take 18 months to develop. Note that a lack of rainfall during the middle of 2011 may result in poor productivity of this cane for the 2012/13 crop.

 

Thailand
The recent flooding in August and September delayed the start to crushing season and despite a promising start to the campaign the yields at the end of the crop reduced sucrose yields, reducing estimated sugar production to 11.2 mln tonnes compared to 10.2 mln tonnes in 2010/11. The possibility is that we have seen a peak in sugarcane production as the floods resulted in 2 million tonnes of rice production lost, increasing the rice price and the potential for increased rice hectares at the expense of cane.

India
The 2011/12 crop is now being harvested, early estimates are positive with the prediction of 27.6 million tonnes compared to 26.3 mln tonnes in 2010/11. The monsoon season delivered sufficient rainfall, although began slowly and protracted, delaying the beginning of the harvesting campaign. The growth of cane acreage in Uttar Pradesh in particular is slowing after two years of expansion although there has been a small increase in plantings this year. Mills in Maharashtra were slow to start crushing in the south with the availability of more cane than crushing capacity, limiting production estimates. Limited rainfall in the region during the start of the monsoon, will have delayed cane development reducing sucrose yields. Domestic prices remain high a reflection that stocks remain low as consumption has grown above population rates.

Australia
The country suffered from awful weather at the start of 2011. La Niña influenced rainfall in January followed by the tropical cyclone Yasi in February left a considerable amount of cane not harvested from the 2009/10 season which contributed to the slight increase in the 2010/11 crop which has just finished, producing 3.8 million tonnes.

USA/Mexico
Wet weather in September resulted in a slow start to the beet campaign and unseasonal warm weather could be further detrimental to the beet stocks stored outdoors, resulting in a further tightening of the domestic sugar supply. Following last year’s frost reduced cane harvest, the 2012 Floridian and Mexican cane crops are currently being harvested. The Florida crop is expected to increase by 6%, but drought in the later part of 2011 may affect the Mexican crop.

China
Higher prices resulted in China increasing the planted area for both cane and beet crops. 2011/12 cane is currently being harvested, after being delayed to try an improve sucrose yields. Estimated production is at 11.4 million tonnes, a 10% increase on last season. The beet yields are also predicted to improve to 1.1 million tonnes, totalling 12.5 mln tonnes for Chinese production.