The global sugar surplus will be 15 percent bigger than initially estimated in the 2012-13 season starting in October, according to Morgan Stanley.
Sugar supplies will outpace demand by 7.8 million metric tons in 2012-13, the bank said in a report e-mailed today. That compares with a forecast for a surplus of 6.8 million tons on May 6. That would be a third year in which production will be bigger than consumption, with a surplus of 8.1 million tons in the current 2011-12 season, according to the bank.
“With a pick-up in Indian exports and the start of the center south Brazilian crush, we expect that the building global trade surplus is likely to weigh on prices,” wrote Hussein Allidina, head of commodities research at the bank in New York.
Sugar exporters from India, the world’s second-biggest producer, don’t need to get permits for shipping the sweetener, the food ministry said in a notification dated May 11. The 2012-13 season in Brazil’s center south, the main growing region of the biggest producer, has started and sugar-cane output is forecast to recover to 509 million tons, up from 493.3 million tons in 2011-12, according to industry group Unica.
Sugar prices may need to fall below 18 cents a pound for millers in Brazil to favor ethanol output at the expense of sugar, according to the report. Raw sugar for July delivery retreated 0.3 percent to 20.17 cents a pound by 6:12 a.m. on ICE Futures U.S. in New York.