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ISO expands sugar deficit forecast, but says 'neutral' on prices


The International Sugar Organization eased to “neutral” its forecast for sugar prices, despite expanding its forecast for the world output shortfall this season, even as Green Pool expanded its deficit estimate too.


The ISO said that its “outlook for higher prices” as outlined in November - when it foresaw “a possible easing of selling pressure” in sugar futures - “continues to be supported” by the prospect of a world production deficit in 2020-21.


However, increased sugar export availability, thanks in part to India’s announcement of a subsidy on shipments, the potential for the “end to just-in-case purchasing” as worries over Covid-19 ease “could weak price prospects going forward.


“We therefore hold a neutral view on the market at this time,” the intergovernmental group said, speaking as raw sugar futures for May on Thursday fell by 2.2% to 16.79 cents a pound in late morning deals in New York.


That took the lot further from the near-four-year high, for a nearest-but-one contract, of 17.52 cents a pound touched on Tuesday, although remains nearly 2.5 cents a pound above the price when the ISO revealed its November report.


Production downgrades

The organisation cut by 2.09m tonne to 169.0m tonnes its forecast for world sugar output in 2020-21, reflecting cuts to expectations for Pakistan, Thailand and in particular the European Union, where the production estimate was cut by 1.29m tonnes following a disappointing beet harvest.


While the global consumption forecast was trimmed too for this season, on an October-to-September basis, at 173.8m tonnes it came in 4.78m tonnes above expected output.


That compared with a forecast in November of a 3.50m-tonne deficit, and fed through in a cut to 53.3% the world stocks-to-use ratio, a key pricing metric.


“This is a three-year low, but within the range seen over the past eight years, during which prices have been between 10 and 22 cents a pound,” the ISO said.


India, Thai downgrades

Separately, analysis group Green Pool also cut its forecast for world sugar stocks in 2020-21, by 1.66m tonnes – but still saw a production surplus, of 502,000 tonnes.


The forecast for Thai production in the marketing year, for which the group uses a range of local crop years rather than the strict October-to-September period used by the ISO, was cut by 300,000 tonnes to 7.6m tonnes, after the country’s cane crush “began falling sharply” earlier this month.


For India, the production forecast was cut by more than 1.0m tonnes to 31.6m tonnes, on weakened expectations for Uttar Pradesh volumes.


“It is possible that the heavy monsoon period last year, combined with some disease (red rot) and a higher diversion of sucrose to ethanol, have impacted production.”


Battle of the sweeteners

For 2021-22, Australia-based Green Pool forecast a further output surplus but, at 4.08m tonnes, cut its forecast by 367,000 tonnes, citing in part increased demand expectations for China.


“We do allow for a small amount of switching from HFCS [high fructose corn syrup] to sugar in China, given high corn prices and consequent high HFCS prices.”


Furthermore, the group warned of the prospect of weaker beet sowings in Europe, after 2020’s disease-reduced harvest and in the face of strong grain prices, while factoring in Brazilian mills allocating a slightly smaller proportion of cane to sugar rather than ethanol.


“Much still depends on the relativity of sugar and ethanol prices in Brazil during the harvest season,” which starts in April in the South American country, Green Pool said.


“Oil prices have had a substantial boost since last month, while Brazil’s real currency languishes at low levels.

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