Czarnikow, restating an estimate that the world sugar
surplus short of that of other analysts, cautioned that output in India may
fall well short of official expectations, limiting the prospect for exports.
The sugar merchant actually nudged higher by 100,000 tonnes
to 2.1m tonnes its forecast for the world output surplus this season, reflecting
a lower estimate for levels of the sweetener lost to "unrecorded disappearance".
The estimate for world production was kept at 181.8m tonnes,
with the consumption figure nudged 100,000 tonnes higher to 178.9m tonnes.
Australia vs India
Nonetheless, Czarnikow's forecast for the world surplus was
lower than that by other commentators.
Kingman, the influential Swiss-based analysis house, earlier
this month raised by 900,000 tonne to 4.5m tonnes its forecast for the 2013-14
And London-based Czarnikow highlighted that, while Mexican
and Australian output had exceeded previous expectations, Indian output looked
set to fall below forecasts, to 22.7m tonnes, on a tel quel basis.
The Indian government estimates output at about 25m tonnes.
"Our view of Indian production has become more negative
given the challenges facing the industry," Czarnikow said, citing setbacks from
a monsoon which brought excessive rain to some areas, and from a financial
squeeze on mills.
The group highlighted in particular the major producing
state of Uttar Pradesh, where "we are concerned that cane yields in central and
eastern regions are significantly lower than previously expected as a
consequence of the distribution of the monsoon rainfall.
"Furthermore, delays in crushing following the announcement
of a high cane price saw farmers selling a higher than expected proportion of
cane to artisan producers to generate cash and allow planting of wheat as a
Uttar Pradesh output is set to fall to 7m tonnes, from 7.7m
tonnes last year, rather than rising the 1m tonnes that Czarnikow previously
If the group's forecast proves true India, whose consumption
is pegged officially at 23m-24m tonnes, may have a far smaller availability for
exports than the 4m tonne-figure quoted in the markets.
Czarnikow added that its world outlook showed "the balance
sheet moving towards equilibrium with a much smaller surplus than in previous
However, with prices remaining weak, "we believe that the
continued destruction of shareholder value will ultimately become a problem for
"Current prices are damaging shareholder value and, as a
consequence, investors will be discouraged from entering the sugar economy
unless they can capture higher returns to compensate for the risks."
This dynamic was particularly true in Brazil, "where assets
have been trading well below replacement cost".