Liberalisation of European Union sugar production will drive output even higher than thought, boosting export prospects and, combined with growing competition from corn sweeteners, potentially weighing on prices, S&P Global Platts said.
The analysis group – lifting by 1.0m tonnes to 2.73m tonnes raw value its forecast for the world sugar production surplus in 2017-18, on an October-to-September basis – flagged “higher output expected” for the Europe”, with a smaller upgrade made to the estimate for Brazil too.
EU sugar output was now seen hitting 19.27m tonnes, white value next season – 950,000 tonnes more than the group forecast in December, and figure which would be the highest in at least seven years, than S&P Global Platts senior analyst Dr Claudiu Covrig said.
On data kept by the US Department of Agriculture, EU sugar output at this level would be the highest since production quotas were drawn up in 2006, to comply with World Trade Organization concerns.
Beet vs cereals
The increased forecast reflected an upgrade of 65,000 hectares to 1.68m hectares in the estimate for EU beet sowings this year, with expectations increased for countries including France, Germany and Sweden.
S&P Global Platts forecasts for EU sugar, 2017-18, (yr-on-yr change)
Beet plantings: 1.678m hectares, (+15.2%)
Production: 19.272m tonnes, (+14.3%)
Imports: 3.0m tonnes, (-9.0%)
Domestic consumption: 18.96m ttones, (-3.0%)
Exports: 2.60m tonnes, (+73%)
Ending stocks: 1.41m tonnes (+91%)
Forecasts made on a white sugar basis
“Prospects for returns for beet are higher in many countries than for grains,” Mr Covrig told Agrimoney.com, although flagging too the need to monitor closely “very dry” conditions in countries such as France.
The increased output will allow EU exports of 2.60m tonnes, an upgrade of 200,000 tonnes from the previous estimate and also the highest figure since 2005-06, since before Brussels imposed its sector reforms.
‘Downward pressure on prices’
Still, with this coming at a time of growing refinery capacity in the Middle East, notably in Saudi Arabia, the extra EU supplies implied a market showing “more and more competition” for customers, particularly in the North African and Middle Eastern region, Mr Covrig said.
This growing rivalry within the sugar industry was coming at a time when relatively weak corn prices were boosting the competitiveness of sweeteners, such as high fructose corn syrup (HFCS), based on the grain.
The likes of isoglucose and high fructose corn syrup “are now cheaper than sugar”, S&P Global Platts said, forecasting that this rivalry would help limit to 1% growth in sugar consumption in global 2017-18, below the average pace of expansion of 1.8%.
The analysis group forecast that sugar prices “may come under downward pressure in the fourth quarter [of 2017], with so much sugar expected to be available globally from Brazil, India, liberalised Europe, and Thailand”.
For Brazil’s key Centre South region, S&P Global Platts raised its forecast for sugar output in 2017-18 – on an April-to-March basis, and in raw sugar value terms – by 223,000 tonnes to 34.93m tonnes, citing the potential for mills to raise the proportion of cane processed into sweetener rather than ethanol.
Even so, the forecast was below that from some other commentators, including Brazil-based Datagro, which earlier this week pegged at 36.8m tonnes sugar output next season in the Centre South, which is responsible for some 90% of Brazil’s production.
Datagro’s estimate was based on a forecast of the cane crush in the Centre South growing to 612m tonnes, rather than falling to 582m tonnes as S&P Global Platts foresees.
“Acreage has not really grown lately,” S&P Global Platts said.
Separately on Wednesday, Societe Generale pegged Centre South sugar output next season at 36.0m tonnes, on a cane harvest of 585m tonnes. Total Brazilian sugar production was forecast at 39.1m tonnes.