The end of the "surplus phase" in world sugar supplies is
nigh, and a "deficit phase" is approaching, but prospects look dim for now for
any rally in prices of the sweetener, the International Sugar Organization said.
The ISO, in a quarterly update, sounded a reassuring note on
short-term sugar supplies, hiking its estimate for world stocks at the close of
for 2013-14 (on an October-to-September basis) by 3.1m tonnes to 77.8m tonnes despite
acknowledging a setback to Brazilian output from drought.
A 475,000-tonne trim, to 39.6m tonnes, in the forecast Brazilian
sugar production was offset by increases to forecasts for India and Thailand,
while ideas of consumption were reduced, largely for India.
The ISO also raised estimate for supplies carried in from
the previous season, leaving its forecast for world stocks as of the end of
2013-14, as compared with use, at 44.0%, up 1.8 points from its previous
'End of the surplus
However, the ISO forecast that production and consumption
would be "neatly balanced" next season, with output from top producer Brazil curtailed
by financial woes facing mills, besides by drought.
"The number of mills in operation in Brazil is shrinking,
the tools available for the government to help the industry are less evident,
and many of the large milling groups are reporting higher debt," the
organisation said, estimating a drop in output from the key Centre South region
of 900,000 tonnes to 33.4m tonnes next season.
World demand, meanwhile, is seen growing at its average pace
of 2.2%, "heralding the end of the surplus phase in the world sugar cycle".
And in its first assessments for 2015-16, the ISO forecast "no
considerable increases" in world production, against a background of a continued
rise in demand.
The organisation gave little insight into details of its
thinking, although it did forecast a 2.7% recovery in Brazilian output.
"The deficit phase may finally start developing," it said, tentatively
forecasting a production shortfall of about 4m tonnes.
That would be the first deficit since 2009-10, following an
aggregate rise in inventories of approaching 25m tonnes in the interim.
Indeed, the ISO was cautious on prospects for sugar price revival
"Any price recovery on the back of a no-stock-change scenario
in the next season might be muted by the huge stocks accumulated since the
beginning of the surplus phase in 2010-11."
Sugar for July, which opened higher on Tuesday, stood up
1.2% at 17.49 cents a pound in New York as of 13:00 local time (13:00 UK time).
Unica, the Brazilian cane industry group, is expected later
on Tuesday to unveil data on the Centre South cane harvest during the last half