Sugar futures rebounded, helped by further increases by Platts Kingsman to estimates for the world’s swing into production deficit, with the forecast for next season lifted to an eight-year high.
New York raw sugar futures for March stood up 2.3% at 14.84 cents a pound in early deals, climbing – just – back above their 40-day moving average, at 14.83 cents a pound.
The increase reflected in part a rebound in the oil price, whose fall in the last session to a six-year low undermined values of commodities, such as sugar, used in making biofuels.
Brent crude stood at $38.42 a barrel, a gain of 1.3%.
However, sugar’s recovery also followed increases by Kingsman to its forecast for the world sugar production deficits for both 2015-16, which started in October, and for next season too.
Indeed, the estimate for the global output shortfall in 2016-17 was lifted by 1.37m tonnes to 7.81m tonnes, on a raw sugar basis – taking it above the 7.62m tonnes recorded in 2009-10.The highest marketing year shortfall in recent history, on an October-to-September basis, was the 15.97m tonnes seen in 2008-09, according to Kingsman.
The analysis group said that the deficit upgrade was “mainly on higher consumption in south east Africa, for which our previous estimates were too low”.
The company counts as southeast Africa countries from the likes of Zambia and South Africa north to Ethiopia and Kenya.
South Africa-based sugar producer Illovo two weeks ago flagged the prospects for growing African sugar consumption.
Kingsman also raised by 1.95m tonnes to 5.26m tonnes its forecast for the world output deficit this season, citing in part also higher consumption estimates, for Thailand, where extra raw sugar appears to have been used by the biofuels industry, and in India, where fears of higher values may encourage stockpiling.
Indian sugar consumption patterns “are likely to change quite dramatically if domestic prices suddenly rise sharply in the various sugar-producing regions in anticipation of a drought or a drop in production,” the group said.
“In such a situation a majority of the industrial buyers, which are mainly spot buyers, are more likely to keep buying more quantities at every possible increase in prices leading to a large build-up of pipeline inventory at the buyers’ end.”
“Such exceptions can cause sudden deviations in consumption patterns.”
Centre South setbacks
However, on the production side, Kingsman also cut by 747,000 tonnes, to 30.36m tonnes, its forecast for sugar output in Brazil’s Centre South region, which is responsible for some 90% of domestic output.
The forecast reflects rains which are slowing cane harvesting, besides depressing sugar levels in the crop, making sugar itself more difficult to crystalize out and encouraging mills to make ethanol instead.
After the loss of 6.6 days of crushing in October, and 15.5 days last month, “December also looks wet, with possibly seven days or more lost to rain in the first half of the month”.
The Centre South cane crush was downgraded by 5.1m tonnes to 594.0m tonnes, although the amount of so-called “bisada” cane carried over for harvesting next season was upgraded to 540m tonnes.
(Source – http://www.agrimoney.com/news/sugar-prices-revive-as-kingsman-ups-global-deficit-forecasts–9114.html)