Abares cut to a 10-year low its forecast for world sugar
prices, citing improved production prospects in the likes of the European Union
and India, which have enhanced the prospects for a world output surplus.
The official Australian commodities bureau lowered by 2.0
cents a pound, to 13.0 cents a pound, its forecast for the average price of
spot New York raw sugar futures in 2017-18, on an October-to-September basis.
The downgrade - which would mean prices averaging their lowest
since the 11.7 cents a pound seen in 2007-08 – implied a fall in futures from
current levels, with the New York October raw contract sugar contract trading
on Tuesday at 14.28 cents a pound.
The futures curve would suggest an average 2017-18 price of
14.8-15.0 cents a pound.
However, Abares said its outlook "reflects world sugar production
increasing at a faster rate than previously expected.
"Global supply is expected to grow faster than demand during
2017-18, leading to this significant fall in price" from the 17.0 cents a pound
pencilled in for this season.
India, EU upgrades
Indeed, Abares raised by 2.8m tonnes, to 5.8m tonnes, its
forecast for the rebuild in world sugar supplies over 2017-18, reflecting in
part a higher estimate for global production.
The upgrade was down largely to a 1m-tonne increase to "around
27m tonnes" in the forecast for Indian output, thanks to a boost to yield
prospects this year from better monsoon rains, and with a raised cane price
lifting the output outlook too.
The bureau noted that "the Indian government increased its
'fair and remunerative price' for cane in 2017-18 by around 11% to 255 rupees a
quintal, around $0.04 a kilogramme".
The EU sugar output forecast was raised by some 800,000
tonnes to a 12-year high of 20m tonnes, on a raw value basis, thanks to the
surge in beet plantings prompted by the removal of production quotas.
By contrast, Abares lowered by some 1m tonne to 185m tonnes
its forecast for world consumption in 2017-18, highlighting the prospect of
declining demand in many Western countries.
"Consumption is expected to continue to fall in the EU and
the US because of long-term declines in the population growth rate, as well as
trends in diet and nutrition policies driven by health concerns."
The bureau trimmed by 21,000 tonnes, to 4.80m tonnes, its forecast
for Australian output in 2017-18, on a July-to-June basis, flagging a hit to
cane yields from "continued dry seasonal condition" in the south of Queensland,
the centre of the country's sugar industry.
It also restated the damage to cane crops from Tropical
Cyclone Debbie, in March.
The forecast for Australian sugar exports in 2017-18, again on
a July-to-June basis, was trimmed by 17,000 tonnes to 4.05m tonnes – unchanged year