Sept. 5 (Bloomberg) -- The global sugar surplus will be 49 percent smaller than previously forecast as lower prices mean growers cut back and consumers buy more, according to Czarnikow Group Ltd., which supplies clients in 83 countries.
Sugar production will be 2 million tons higher than demand in the 2013-14 season that starts in October in most countries, the London-based company said in a statement e-mailed today. That’s down from a previous forecast for excess supplies of 3.9 million tons. While global output will fall 2.2 percent next season from 2012-13, consumption will gain 2.3 percent this year and another 2 percent next year, Czarnikow estimated.
Raw sugar futures in New York, down 16 percent in 2013, are heading for a third year of declines. Prices fell as producers from Brazil to Australia expanded plantings after futures climbed to a 30-year high in February 2011. The price of sugar in the physical market is higher than that on the exchange, which is “not consistent with projections of surplus supply,” said Czarnikow, which traded 2.4 million tons of raw sugar last year and 800,000 tons of the white, or refined, variety.
“The strength of the physical market is telling us that the supply side of the market, rather than being challenged to find demand, is actually challenged to meet demand,” said Toby Cohen, a director at the company, which also trades ethanol. “The balance sheet is already changing. The gap between production and consumption has narrowed.”
Global sugar output will fall to 181.8 million tons from 185.8 million tons a year earlier and will be smaller than a previous forecast of 182.8 million tons, Czarnikow said. While production from beets will drop to 34.3 million tons, the lowest since 2010-11, output from cane will slide 0.6 percent to 147.5 million tons, the company said.
Lower sugar prices meant increased imports into nations in Asia, Africa and the Middle East, said Czarnikow. Consumption will be 175.2 million tons this year and 178.8 million tons in 2014, Stephen Geldart, a senior analyst at the company, said by phone from London today. Global sugar exports gained more than 10 percent in the past 12 months as the market returns to “a high growth phase in usage.”
Sugar production in Brazil’s center south, the main growing region of the world’s biggest producer, will be lower than previously forecast because rains meant mills had to produce more ethanol in July and frost in the states of Parana and Mato Grosso do Sul reduced agricultural yields, Geldart said. Millers will harvest 585 million tons of cane and make 34.1 million tons of sugar, down from a previous forecast for 595 million tons of cane and 36 million tons of sugar, according to the statement.
In Europe, output will slide 5.8 percent to 16 million tons in 2013-14 on lower yields and smaller planted areas, especially in Italy and Germany, Czarnikow said. In Australia, the world’s third-biggest exporter, the crop will be 4.5 million tons, similar to last year’s, and South African output is forecast to rise 20 percent to 2.6 million tons, according to the company.
Raw sugar for October delivery rose 0.3 percent to 16.43 cents a pound by 8:04 a.m. in New York. Prices, which fell to a low of 15.93 cents a pound on July 16, will advance to 18.30 cents a pound in the last three months of the year, according to the mean in a Bloomberg survey of 12 analysts.
“With the physical market tight and the balance sheet now much closer to equilibrium, the biggest question for the market is what is a fair value for sugar today?” Geldart said.
--Editors: John Deane, Claudia Carpenter