Sugar prices are to hit 11-year low next season, thanks to greater than expected carry-over of inventories, Australian government crop agency Abares said.
Abares lowered its estimate of 2016-15 raw sugar prices to just 10 cents a pound, compared to a forecast of 13 cents a pound made in June.
Abares saw the average 2014-15 sugar price at 14 cents a pound.
“World supplies are forecast to be plentiful, with world carry-over stocks in 2014-15 expected to have reached record levels,” Abares said.
Lower production
The agency lowered its forecast for 2015-16 sugar production, to 182.0m tonnes, from 182.6m tonnes.
This compares to production of 183.0m tonnes last year.
And consumption will rise by 2% from last year, to 184.7m tonnes, in line with Abares’ forecast three months ago, meaning that the sugar deficit, the degree to with demand outstrips supply, is seen at 2.7m tonnes.
The International Sugar Organisation last month forecast the size of the coming sugar deficit at 2.5m tonnes.
Carry-over
But Abares revised up its forecast for 2014-15 ending stocks by 2.6m tonnes from its June estimates, to 80.8m tonnes.
This translates to 2015-16 end stocks of 78.1m tonnes, up from 76.8m tonnes forecast three months ago.
This significant upward revision to carry-over would weigh on prices, despite the wider deficit in production.
Increase exports
And an increase in supplies available for export from Thailand, India and Australia will grow the world sugar trade, further increasing availability.
World sugar exports are forecast to rise by 3% to 61m tonnes.
Thai sugar exports are forecast to rise by 12%, to a record 9.5m tonnes.
“Sugar production is forecast to decline in neighbouring countries, including China, Indonesia and Malaysia, so exports from Thailand are expected to be directed to these markets,” Abares said.
Indian sugar exports are seen at 3.2m tonnes in 2015–16, up 28% from the previous year.
“This forecast increase assumes the Indian Government will continue to subsidise sugar exports, which will provide an incentive for mills to dispose of a significant volume of sugar stocks on export markets.
