US officials sided with commentators forecasting a third decline in world sugar inventories next season, despite expectations of record European Union output, which will send the bloc's export soaring too.
The US Department of Agriculture, in its first estimates for world sugar supply and demand in 2017-18, forecast inventories declining 600,000 tonnes to a six-year low of 38.3m tonnes.
The forecast, which would take above 10m tonnes the drop in stocks over three seasons, comes amid some market debate over whether world sugar output will return to a surplus next season.
Among scenarios presented to New York's sugar week last week was an estimate from Sucden Financial of a 3m-tonne surplus, and from Datagro of a 200,000-tonne production deficit, and INTL FC Stone a shortfall of 300,000 tonnes.
The USDA said its estimates showed that "lower stocks in China and Mexico more than offset higher stocks in Pakistan", in a decline coming "despite record production".
Indeed, the USDA forecast world sugar output rising by 8.8m tonnes to a record 179.6m tonnes, reflecting in part expectations of a sharp recovery in Indian production from drought-affected levels.
Output in the world's second-ranked sugar producing country was seen rising 3.9m tonnes to 25.8m tonnes "due to higher area and yields", although this will still fall a little short of domestic demand, boosting reliance on imports.
The USDA foresaw India as net importer of 700,000 tonnes of sugar in 2017-18.
China's sugar output was seen rising too, by 1.0m tonnes to a three-year high of 10.5m tonnes "due to an expected boost in area", sufficient to reduce the country's import needs next season by 1.0m tonnes to a five-year low of 4.20m tonnes.
However, the USDA also highlighted the prospect of a 2.1m-tonne increase in EU output, thanks to market liberalisation which will from October see the removal of the bloc's quota regime, and export limits.
"Production in the EU is forecast to export… to a record 18.6m tonnes on higher area and yields," said the USDA, whose output estimate is higher than that of some other commentators with Green Pool, for instance, earlier this month seeing output at 18.3m tonnes.
Exports were forecast soaring nearly 50% to 2.2m tonnes, exceeding imports were seen slumping by more than one-third to 2.0m tonnes.
The impact of the EU reforms has become a topic of increasing market debate, with the bloc's Cibe beet growers' group on Thursday cautioning of an "extremely challenging context" for farmers thanks to the shake-up.
"The abolition of the quota system leads to a changing regulatory context… to increased competition and to a greater exposure to market risks due to expected strong volatility and low prices," the group said, after its annual meeting.
Cibe pegged at 17% the rise in EU sugar beet sowings this year.
Separately, Suedzucker, the German-based sugar giant, on Thursday forecast a boost to its profits from the reforms, which it saw boosting its annual exports from some 235,000 tonnes to 800,000 tonnes.
"We see ourselves as well prepared" for the changes, said Wolfgang Heer the chief executive of Suedzucker, which forecast its operating profits for the year to February 2018 hitting E425m-500m, compared with E426m the year before, "driven mainly by better sugar segment results".
The USDA added that "for the EU sugar refining sector, new market opportunities may open up, although it will continue to face restrictions from high import tariffs, fixed import quotas, and decreasing preferential sugar import supplies.
"As a consequence, the EU sweetener market enters a new era with likely increased market volatility for the next few years until the various industries find new market equilibrium."
By Mike Verdin