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Sugar price revival 'contrary to fundamental outlook', says ISO


The revival in sugar prices is “contrary to the fundamental outlook”, the International Sugar Organization said, as it slashed its estimate for the world production deficit this season, while seeing a small shortfall in 2020-21.


The intergovernmental group cut from 9.30m tonnes to 136,000 tonnes its estimate for the world sugar production deficit in 2019-20, as ends this month.


The revision, which the ISO said “changes the status of the balance from the largest decline in 11 years to neutral”, reflected a 2.78m-tonne upgrade for output from Brazil, where weak ethanol prices have spurred mills to allocate even more cane than had been thought to making sugar instead.


Furthermore, the organization slashed its forecast for global consumption, reflecting damage from Covid-19, besides a series of revisions to data for previous years. The estimate for pandemic damage to demand was expanded to 2.72m tonnes, from 2.1m tonnes.


In its first estimates for 2020-21, the ISO forecast a deficit of 724,000 tonnes – making a total shortfall of 860,000 tonnes over the two seasons.


That compares with a 3.35m-tonne surplus over 2018-19 alone.


‘Finds obvious resonance’

Noting a recovery in sugar prices - which since the ISO’s previous briefing, in May, have recovered 16.7% in New York, on a front contract basis – the USO said that “this recent movement is contrary to the fundamental outlook for the 2019-20 season, where the deficit has narrowed significantly”.


However, the organisation added that the price strength “finds obvious resonance with food access concerns and a global supply situation which seems to depend almost exclusively on Brazil.


“It might also suggest that the 31% drop in prices” as it reported for the February to May period “was an overshoot”.


New York spot raw sugar futures in late April touched 9.05 cents a pound, the lowest since 2007.


Production forecasts

The forecast for a 724,000-tonne world output deficit in 2020-21 reflected expectations of rising world production and consumption.


Output was seen rising by 3.88m tonnes to 173.5m tonnes, reflecting largely a 4.33m-tonne increase to 31.5m tonnes in Indian output, reflecting a strong monsoon.


For Brazil, sugar production in 2020-21 – on an October-to-September basis, rather than the April-to-March year used in the South American country itself – was pegged at 34.7m tonnes, down 2.7m tonnes year on year.


Australian output was seen growing by some 200,000 tonnes to 4.30m tonnes, and EU production, including the UK, by more than 220,000 tonnes year on year, to 16.8m tonnes.


The data imply “an increase of 1.97% over a two-year period from the 2018-19 consumption estimate,” the ISO said, underlining that this represented “an annual growth rate of less than 1% for global consumption”.

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