Sugar prices falling – even as consumption rises
Worldwide, sugar stocks are at record levels, and high stocks have been bolstered even further after better than expected sugar production from India and Thailand. Even with demand predicted to outstrip production in 2015-16 – for the first time in five years – the impact on prices could be limited, Rabobank said. Current prices are below the cost of production for most producers.
"This year's final production from India and Thailand caught most of the industry by surprise, further highlighting just how precarious surplus/deficit predictions can be," Rabobank analyst Yong Chang Jian said in a statement, adding that prices may go even lower.
"The market might be paying for the cost of carry, but at some point in time, producers and exporters can no longer kick the can down the road and will eventually be forced to sell any accumulated stocks.”
The report added that major importers had already bought sufficient sugar to meet their needs, and therefore falling prices would do little to affect immediate demand.
End of the EU sugar regime
In the EU, the European Commission has announced that out-of-quota sugar and isoglucose produced in the last year of the quota regime – due to end in October 2017 – can be carried through to the 2017-18 marketing season without sanctions.
“Bearing in mind the possibility of excessive volumes of sugar coming to the market as of 1 October 2017, the European Commission will follow the developments and has the mandate to take appropriate measures in case of market disturbance,” the report said.
El Niño uncertainty
With an El Niño event widely expected to hit major commodities this year, Rabobank added that there was “much debate as to what extent the weather risk has not been priced into the market”.
