Sugar price rally not over yet, says ISO, flagging 'critically low' stocks


The rally in sugar prices, already close to four-year highs, has further to run, spurred by the fall in world inventories to "critically low" levels, the International Sugar Organization said, despite foreseeing a rise in output.

The intergovernmental group, in its first forecast for the world sugar production deficit in 2016-17, pegged it at 7.05m tonnes, one of the highest shortfalls on record.

Following on from a 5.74m-tonne deficit in 2015-16, on an October-to-September basis, the shortfall leaves the world looking at a tumble in stocks below 75m tonnes by the end of next season.

Compared with demand - to form the stocks-to-use ratio which represents a major pricing metric – inventories will drop by a "significant" 4.9 points over 2016-17 to the equivalent of 43.2% of consumption.

"This is the lowest level since 2010-11," the ISO said.

"It is also below the seemingly critical level of 45% which eventually triggered a surge in raw sugar prices above 24 cents a pound" between 2009-10 and 2011-12.

'Critically low'

Indeed, the ISO said that its estimates, in showing a fall in the stocks-to-use ratio to a "critically low level", provide a "clear indicator to the world sugar markets.

"Values seem to be poised for continued strengthening, particularly in the first half of 2017," as sugar production from Brazil's key Centre South region hits its seasonal low.

The Centre South is responsible for some 90% of sugar output in Brazil, the top producing country.

The ISO added that the world trade balance in sugar is "extremely tight, and may tighten further if there are any unforeseen reductions in [world] production".

Output vs demand

The comments came as the ISO, in its first full 2016-17 estimates, forecast world production rising by 2.17m tonnes year on year to 168.0m tonnes.

"This improvement, however, is too low to cover growing use of sugar," seen rising by nearly 3.5m to 175.1m tonnes, the London-based organization said.

Brazilian output in 2016-17 – on an October-to-September basis – was seen falling by 1.25m tonnes to 36.5m tonnes.

And production in second-ranked India was seen falling to a multi-year low of 24.5m tonnes.

However, European Union sugar output was, at 15.65m tonnes in 2016-17, seen growing by more than 1.4m tonnes.

Major producers such as Australia, China and Russia were also seen recording output increases.


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