Sugar prices, which have already fallen near two-year lows,
may need to decline further to encourage demand, Czarnikow said, even as it
narrowed its estimate for the world production surplus.
The sugar merchant cut by 1.4m tonnes, raw value, its
forecast for the global output surplus in 2012-13, citing a higher estimate for
consumption, while dry weather in India has worsened production prospects.
"Dry conditions in Maharashtra and Karnataka are hitting
output," the group said, slashing to 25.9m tonnes its estimate of sugar output
in India, the second-ranked producing country.
However, at 7.1m tonnes, Czarnikow's forecast for the sugar
surplus was higher than that of many other observers, and implied continued
pressure on prices, the London-based group said.
'Prices may need to
"We continue to forecast a fourth, consecutive year of
rising cane sugar production" said Czarnikow director Toby Cohen.
"A production surplus - and lower prices - should encourage
|Forecasts for world sugar surplus, (output, consumption) 2012-13|
Czarnikow: 7.1m tonnes, (180.6m tonnes, 173m tonnes)
Kingsman: 6.69m tonnes, (177.3m tonnes, 170,6m tonnes)
Rabobank: 5.24m tonnes,
Datagro: "just over 3m tonnes"
"But consumers may not respond as quickly as the market
While the recent return in sugar prices below 20 cents a
pound "should encourage demand after four years of slow growth, this is likely
to be a gradual process", the group said.
"Prices may need to fall further to boost consumption."
New York sugar for October stood at 19.01 cents a pound
ahead of the report's release, 0.3% higher on the day, but down more than 20%
from highs in late July - and nearly 50% below a 30-year peak reached in
The Czarnikow estimate included an upgrade of 1.2m tonnes to
33.5m tonnes in the forecast for sugar output from Brazil's key Centre South
region, on a cane harvest of 525m tonnes.
"Rainfall delayed the start to the crushing season, but has boosted
the quality of the cane," the group said.
The estimates are more upbeat than those from Unica, the milling industry group, which on Thursday cut its forecast for Centre South 2012-13 sugar output by 400,000 tonnes to 32.7m tonnes, after early-season rains cut sugar content in cane.
On Wednesday, consultants
Datagro downgraded by 1.4m tonnes to 31.3m tonnes its forecast for
Centre South sugar output, citing disappointing yields and recent unexpected
"The cane crop is unexpectedly flowering, which has
surprised the sector," Datagro president Plinio Nastari said.
Datagro revised it output estimates for the cane harvest in
the key growing region, responsible for nearly 90% of Brazilian production,
from 508.7m tonnes to 512.1m tonnes.
The fall in sugar prices has defied some positive
macroeconomic news, including the surprise decision by the Federal Reserve last
week to further expand its monetary base and similar moves by the Bank of Japan
However, many analysts remain negative towards prices as
recent information from Brazil has supported views of a market surplus in the
coming year, reducing the so called 'risk premium' priced in earlier in the
year amid concerns of disruptions.
"As the global supply/demand balance has moved from deep
deficit to surplus and with the expectation of a further surplus and build-up
of stocks in 2012-13, the price cycle has followed suit," said Rabobank in its
latest quarterly report.