ISO Sees Bearish Sugar Market in 2012-13 on Rising World Surplus

Global sugar prices, which fell 18 percent this year, may remain “under bearish pressure” until the end of the season that started last month because of a rising surplus, according to the International Sugar Organization.

Global supplies will be 6.2 million metric tons higher than demand in 2012-13, up from a previous forecast of 5.9 million tons, the London-based sugar group said in a quarterly report e-mailed today. That follows a surplus of about 7 million tons a year earlier, according to the report. Global production will climb to a record 177.6 million tons this season as output expands in top producer Brazil, the ISO said.

“In 2012-13, a record high global total can be largely attributed to a projected recovery in the world’s leading producer,” the ISO said in the report. “World market prices could remain under bearish pressure until the end of the current October-to-September crop cycle.”

Global sugar consumption will be 171.4 million tons in 2012-13. That is higher than 168.1 million tons in 2011-12 and lower that the group’s August forecast of 171.5 million tons. Stockpiles at the end of the season will be 5.3 percent higher than previously estimated at 66.3 million tons, the ISO estimates. Inventories were 65.3 million tons in 2011-12.

“Assuming that most of the projected trade surplus well in excess of 5 million tons is added to stocks at the end of the season, the stocks-to-consumption ratio would rise above 40 percent,” the ISO said. “The period of low stocks environment, one of the main market characteristics for four seasons from 2008-09 to 2011-12, is likely to be over.”

Sugar output in Brazil will climb to 38.5 million tons in the 2013-14 season that starts there in April, the group forecast. That compares with 36.1 million tons a year earlier. The sugar-cane crop will be 617 million tons, “in line with the previous record output of two years ago.”

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