Bloomberg News

Sugar Surplus Forecast Cut at Kingsman as Indian Output Slides

August 31, 2012

The global sugar surplus for the coming season will be 5.9 percent smaller than first estimated as output falls in India, the world’s second-biggest producer, according to Kingsman SA.

Supplies will exceed demand by 8.7 million metric tons in the 2012-13 season starting in October, below a June forecast of 9.3 million tons, the Lausanne, Switzerland-based researcher and broker said in a report e-mailed today. That follows a surplus of 10.1 million tons in the current period. On a national crop- year basis, starting when harvests are actually collected in each country, the projected surplus fell 17 percent to about 6.7 million tons, according to the report.

The surplus for the year from October exceeds the national crop-year estimate because it takes into account part of the 2013-14 crop in Brazil that starts in April, said founder Jonathan Kingsman. Higher prices increased the incentive to produce in countries including China, Mexico and Russia. Bigger crops there will compensate for falling output in India. Sugar reached a 30-year high of 36.08 cents a pound in New York in February 2011 and has since dropped 45 percent, while remaining above the 10-year average of 14.6 cents.

“World prices have been high and this has encouraged production in a whole lot of countries outside of Brazil,” Kingsman, who traded sugar for more than three decades, said by phone today. “Russia and China have been building their domestic production and replacing needs for imports. The outlook is not particularly good, but we’ve been caught before by the weather, when we saw the rally from 19 cents to 24 cents a pound, so we are still susceptible to the weather.”

Indian Output

Dry weather in India, the world’s biggest sugar consumer, will cut production to 24.25 million tons in 2012-13, below a previous forecast of 25.5 million tons, Kingsman said. The country produced 26.2 million tons in 2011-12. The monsoon, which brings about 70 percent of national rainfall, has been 12 percent below normal since June 1, according to the India Meteorological Department. That compares with a deficit of 29 percent at the end of June.

“Although the monsoon rains in India have picked up in the second half of August, large cane areas in central Maharashtra have been damaged beyond recovery,” Kingsman said in the report.

China’s crop will rise to 12.75 million tons in 2012-13 from 11.5 million tons this season, Kingsman estimated, saying output may reach 13.5 million tons if favorable weather continues. The nation’s imports are unlikely to surpass the quota of 1.94 million tons in calendar year 2013, he said. China’s imports will total 3.3 million tons of raw sugar and 650,000 tons of the white variety in 2012, he added.

Russian Imports

In Russia, sugar production will climb to 5 million tons, above a previous estimate of 4.7 million tons, according to the report. The country will see raw-sugar imports drop further to 450,000 tons in 2012-13 from 530,000 tons in 2011-12, Kingsman said. Russia imported 2.6 million tons of raw sugar in 2010-11, when it was the world’s biggest buyer, Kingsman said.

“Russia disappeared from the world market this year, but was replaced by China as a massive importer,” Kingsman said. “In 2012-13 the Russians won’t need to import again, the Chinese won’t need to import very much, and this is likely to make Indonesia the biggest importer of raw sugar. We are losing two very big raw-sugar importers.”

Thailand, EU

In Thailand, the second-biggest exporter, sugar-cane output will be 100 million tons, yielding 10.6 million tons of sweetener, unchanged from a previous estimate, Kingsman said. Thailand produced 97.3 million tons of cane in 2011-12 and 10.7 million tons of sugar. Yields for 2012-13 will be “slightly lower,” the broker said.

Sugar production in the European Union will fall to 16.19 million tons from a previous forecast of 16.41 million tons because of dry weather in southern and eastern regions and wet weather in western Europe, it said. Output in Mexico will be 5.3 million tons, against a previous forecast of 5 million tons, according to the report.

Global sugar production will be 180 million tons in the year starting in October, above a previous forecast of 179.9 million tons and 177.6 million tons this season, the researcher said. Consumption is forecast to total 171.3 million tons, exceeding a previous forecast of 170.6 million tons and 167.5 million tons this season, the report showed.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.


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