The global sugar surplus will be 9.9 percent bigger than estimated previously as lower prices the past two years have yet to spur more demand, according to London-based Czarnikow Group Ltd.
Global sugar production will be 7.8 million metric tons higher than consumption in the 2012-13 season, said Czarnikow, which traded the sweetener in more than 90 countries last year. That is up from 7.1 million tons forecast before, it said in a statement e-mailed today. Sugar is down 17 percent this year after falling 27 percent last year.
“We haven’t seen tangible signs of higher demand, despite sugar prices falling significantly over the last two years,” said Toby Cohen, a director at Czarnikow. “The big question is when consumption will start to respond and we will see a return to the faster rates of growth seen in the past decade.”
Sugar consumption will amount to 169.9 million tons this year, down from 170.4 million tons estimated in August, Czarnikow said. Demand for the sweetener in 2013 will be 172.2 million tons, down 800,000 tons from the August forecast.
Higher corn prices are prompting substitution of corn sweeteners in Mexico, said Peter de Klerk, an analyst at the company in London. In China, which was the world’s biggest raw sugar importer last season, government support of sugar prices is buoying demand for corn sweeteners, Czarnikow said.
“The fall in price will boost affordability as the price of sugar is almost half what it was at the peak of the bull cycle,” de Klerk said. “We expect higher corn prices to reduce the price differential between sugar and corn sweeteners.”
Global sugar output has risen less than 1 percent this year, down from about 7 percent in the previous two years as lower prices reduced the incentive to expand production, according to Czarnikow. While cane sugar output will be 143.9 million tons, 600,000 tons higher than an August estimate, beet sugar production will decrease by 700,000 tons from the previous forecast to 36.7 million tons, it said.
Cane sugar production will rise because of a bigger crop in Mexico, which is now forecast to produce 6.3 million tons, up from an August estimate of 5.8 million tons and 5.5 million tons last year, Czarnikow said. Beet sugar supplies will be reduced because of lower yields in China and Russia, it said.
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.