Data provider Platts Kingsman on Sunday forecast the global sugar surplus would halve to 2.0 million tonnes in 2014/15 as sugar growing became less profitable due to low prices. The effects of lower world prices, however, have been mitigated by currency movements and government intervention, shielding farmers, it said in a statement released during the February 8-11 Platts Kingsman Dubai sugar conference.
"Lower prices, both at the world and domestic levels, have affected mills' profits and farmers' revenues," Platts Kingsman said. "Sugar is not as profitable to grow as it was two years ago." Due to a shorter crop cycle, the beet-producing countries were the first to react to the weakness in ICE raw sugar prices, which hit a 3-1/2 year trough of 14.70 cents a lb on January 28 due to abundant global supplies.
Platts Kingsman estimated production in Europe, Russia and Ukraine to drop by a combined 2 million tonnes in 2013/14. "The weather ... is affecting the size of the crop, notably in Mexico, in India but also in Europe, where yields have dropped significantly," it said.
The data provider said it forecast global sugar production at 180.1 million tonnes in 2014/15, up from 178.4 million tonnes in 2013/14.
"Despite lower prices but because of better weather we expect the world to produce more sugar in 2014/15 than it did in 2013/14," Platts Kingsman said.
"However, lower prices have stimulated consumption and the net effect is a projected smaller surplus in 2014/15 than in 2013/14."
Platts Kingsman projected global sugar consumption to rise to 178.1 million tonnes in 2014/15 from 174.4 million tonnes in 2013/14. In the centre-south of Brazil, recent dry weather in Sao Paulo and Minas Gerais has raised concerns over the development of the cane for the 2014/15 season and the possibility of a lower total cane crush than in 2013/14, Platts Kingsman said.
"However, with cane availability hovering at around 610 million tonnes, any losses in agricultural yields may not necessarily mean a lower crush," it said.
