Green Pool highlighted the threat to sugar consumption from the
likes of health concerns and rival sweeteners as it raised by 837,000 tonnes
its forecast for the looming world sugar production surplus.
The Australia-based sugar consultancy revised up to 5.55m
tonnes its forecast for the global output surplus in 2017-18, taking it to the
largest since 2013-14.
The upgrade reflected in part a nudge higher to 188.4m
tonnes in the estimate for production, prospects for which "have been boosted
significantly by the high prices of the last 12 months or so", during which
period they have averaged 19.08 cents a pound.
Output at that level would be up 10.6m tonnes year on year.
'Consumption is struggling'
However, Green Pool's revision to its stocks forecast was
down in the main to a reduction of more than 500,000 tonnes, to 181.9m tonnes,
in the estimate for global consumption in 2017-18.
That represents an increase of just 2.6m tonnes year on
Sugar demand "is struggling – facing high domestic prices in
many countries, assisted by high tariffs and duty barriers, and high import
prices from the global surge in the past year", the group said.
"But sugar consumption also faces health concerns and sugar
taxes in many countries, not just developed countries, limiting its usage."
Additionally, rival sweetener such as high fructose corn
syrup and low calorie alternatives "have made inroads into sugar usage where
high prices have provided a market for them".
Green Pool lowered to 1% its forecast for average annual sugar
consumption growth ahead, well below historic rates of increase.
"Traditionally 2% or more growth has been the norm."
The comments come amid increasing debate over the future of
sugar demand, with concerns of slowing growth viewed as a big factor in the
tumble in New York prices back below 13 cents a pound over the past week,
Brazil's Sao Martinho this week termed "not very probable"
ideas of a fall in demand in India.
In fact, New York's October contract soared 6.3% to 13.56
cents a pound in late deals on Thursday, in a rally attributed to a rash of
short-covering, triggered by ideas that prices had reached such low levels that
Brazilian mills would be tempted en masse to covert cane into ethanol rather
than the sweetener.
faster than we had imagined'
Indeed, Green Pool rated as a "risk" to its expanded
forecast for the world sugar surplus in 2017-18 the idea that Brazilian mills
might increasingly favour ethanol over the sweetener.
"Sugar prices have collapsed faster than we had imagined,
and if they fall much further, we may need to cut" an estimate of 35.5m tonnes for
sugar output from Brazil's key Centre South region.
"Massive premiums that sugar held over hydrous ethanol over
the past year have all but disappeared.
"We may soon be back in a situation where hydrous [ethanol] is
paying a premium to sugar."
The group also cut its estimate for the world sugar output
deficit in 2016-17 by 1.93m tonnes, raw value, to 2.04m tonnes, citing an
enhanced estimate for Pakistan's production.
The Pakistan Sugar Mills Association said last month that
the country's sugar production surged to 7.05 mln tonnes, tel quel, in 2016-17,
from 5.08m tonnes last season.
Green Pool attributed the output jump to "high,
government-fixed cane prices and substantial diversion by farmers of land from
cotton to cane".
The figure had met with "some disbelief around the market, given
it happened in the middle of that industry's negotiations with its government
over export quotas and export subsidies".