World sugar stocks on track for recovery

By Lynda Searby

- Last updated on GMT

Related tags: Harvest, Sugar beet, Rabobank

World sugar stocks on track for recovery
Sugar stocks should rise significantly from their current low levels, with analysts forecasting a global sugar surplus of around 9.5m tonnes in the 2011/12 (October-September) crop year, on the back of increased production in Europe and Asia.

In its ‘Sugar Quarterly - Q3 2011’ newsletter, which was published this week, Rabobank International said that “with current crop expectations and normal weather conditions over the coming year, the market should see global stocks gradually accumulating as the new northern hemisphere beet and cane crops are harvested and processed.”

However, the food industry should not raise its hopes too much about the implications of higher stock levels.

“It is more a story of recovery in 2011/12 following poor performance in the previous season,” ​Rabobank analyst Andy Duff told

“Last year output in both the EU and Russia was impacted by unfavourable weather. This season, weather has been good, and yields are expected to be higher. The same is true for China, where output has been below trend for the last couple of years, but high cane and beet prices should see output rebound in 2011/12. India, meanwhile, is seeing cane area increase for 2011/12 as a result of good prices,” he explained.

Little price relief

In the short term it does not look as though there will be much respite from high sugar prices.

“It will only be in late Q4 2011 that the European beet harvest will be finished, while major northern hemisphere cane crop harvests will not start until Q2 2012,”​ explained the report’s authors.

As a result, global stocks will continue to be tight for some months ahead, and the market will remain extremely sensitive to availability of supplies from Brazil, the world’s largest exporter - and forecasts for cane, sugar and ethanol production in the region have been revised downwards twice over the last month.

“In the short term, before the northern hemisphere harvests, the international market remains especially dependent upon Brazil. Any additional bad news or downward revision could further boost nearby prices,” ​wrote the Rabobank analysts.

UNICA, the Brazilian sugar cane industry association, revised its forecast for projected cane production from an initial 568 million tonnes at the end of March, down to 533 million tonnes in mid-July, and then 510 million tonnes on 11 August.

The key factors impacting Brazil’s cane yields this season are the ageing of crops as a result of the low rate of replanting in recent years, and the effect of dry weather in 2010.

On the positive side, the EU, Russia, India, Thailand and China are all expected to make significant contributions to increasing world output in 2011/12.

Good EU crop cold comfort for food industry

In the EU, sugar beet production could be between 10 and 15 per cent higher than last season, with the region’s two top-producing countries - France and Germany - expecting excellent harvests thanks to favourable growing conditions.

However, Rabobank points out that the increased EU domestic sugar production will have no effect on the supplies for food use, due to quota limits.

“All production above the quota will either be sold at the industrial sugar market, ie not used for direct human consumption, or exported,” ​said the report.

Nevertheless, Rabobank says relief for the current supply shortages should come with the newly introduced tariff-free quotas.

Related topics: Commodities, Ingredients

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