The global sugar market faces a supply gap in 2020-2021

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Sugar prices are forecast to increase in 2019/20 due to significantly reduced production from India, EU and Thailand. However, prices fell by more than 30% between February and April 2020 due to disruption and blockages caused by Covid.

With unfavorable weather conditions in Brazil and Thailand and a drop in European production, the focus is now on India, which is expected to record exceptional production in the 2020/21 sugar season. Under a global production deficit scenario, sugar prices in India are expected to remain stable to high, but massive carry-in stocks could limit price gains.

The International Sugar Organization (ISO) estimates world sugar production at 171.1 t against consumption of 174.6 t for the current year. The expected increase in sugar deficits is due to lower production estimates (compared to forecasts) in the EU, Brazil and Thailand.

Brazil, which contributes nearly a fifth of global sugar production, could experience a drop in production in 2020/21 due to drier weather conditions and a relatively firmer outlook for crude oil.

Thailand – which accounts for around 9 percent of global sugar production – may also plant fewer crops this year due to dry weather. The European Union is expected to experience a decline in sugar production for the third year in a row due to reduced acreage and a high incidence of viral diseases. With the easing of foreclosure restrictions, demand for sugar from major Asian countries, particularly Indonesia and China, the two major importing countries, is expected to be higher. Indonesia will import 10% more sugar to reach a record 3.3 million tonnes in 2021. China has already imported 4.36 tonnes of sugar in January-November 2020, up 37% from the previous year. same period last year and is expected to further increase its stocks of sweeteners. .

India Postman

Even after taking into account the reduction in its sugar production due to the diversion of ethanol of around 1.5 t, India is expected to produce 30.5 t of sugar mainly due to the increase in production in the Maharashtra and Karnataka, according to the sugar organization ISMA. With a carryover stock of 10.64 mt at the start of the current season and domestic demand stuck at 26 mt, India will have an additional 15 mt of sugar.

India is expected to be able to unload up to 6 million tonnes of excess sugar in overseas markets, especially Indonesia. This is a big positive point but it will not be enough to liquidate the unsold stocks.

Outlook

Steadily rising crude oil prices and declining global production will provide much needed support for sugar prices. However, huge inventories and robust production in the current season and nearly stagnant domestic demand will limit price gains.

The writer is co-founder, director and head of agriculture, food and retail at Indonomics Consulting. Views are personal

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