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.
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 on year.
By Mike Verdin