Rabobank: Lower sugar prices set to continue in 2015

By Caroline SCOTT-THOMAS contact

- Last updated on GMT

Farmers need time to switch from sugarcane to other crops, meaning response to lower prices has been slow
Farmers need time to switch from sugarcane to other crops, meaning response to lower prices has been slow

Related tags: Sugar beet

Global sugar prices are likely to remain low in 2015 as production looks set to continue at a similar level, according to Rabobank’s Q4 sugar report.

The main reason that prices have been low is the large amount of sugar available on the global market, the analysis firm said, and it predicts this will fall only slightly during 2015. With sugarcane providing about 80% of the world’s sugar, its growing characteristics have a big impact on sugar production.

"Cane is a semi-perennial crop, meaning that if farmers don't like the current cane price, it nevertheless takes them time to switch land out of cane into other crops,”​ said Rabobank’s Andy Duff. “That is one reason for the slow response to low prices. Another reason is the diminishing incentive to switch to other crops, given that the prices of many other agricultural commodities are also falling along with sugar prices.”

There is still time for conditions to affect the forecast in several important regions, but EU sugar production is forecast to increase 12% in the 2014/15 marketing year compared to the previous year, Rabobank predicts, while production is also up in India.

However, a wet autumn in Mexico is forecast to effect yields there, Indonesian production is not keeping up with increased domestic demand, production in both Thailand and China is projected to be 12% lower than last year, and Australian production may be affected by El Nino in 2015.

“In addition, developments in oil prices over the last three months have emerged as a new potential driver of prices in 2015,”​ Rabobank said.

US sugar prices by contrast have risen significantly “and are expected to remain firm”​,it said, due to a trade dispute with Mexico, a tight balance sheet and lower beet sugar production.  

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