Sugar Shortage Forecast Raised 22% by Green Pool as El Nino Hits

  • Global supplies to fall short of demand by 5.6 million tons
  • El Nino to reduce output in China, India, Central America

A global sugar shortage will be bigger than previously forecast as the strongest El Nino in almost two decades hurts crops from India to China, according to Green Pool Commodity Specialists.

Supplies will fall short of demand by 5.6 million metric tons in the 2015-16 season, the Brisbane, Australia-based researcher said in a report on Wednesday. The deficit, set to be the first in six years, compares with an August forecast for a shortfall of 4.61 million tons.

El Nino, which can bake parts of Asia and alter rainfall in South America, will be the strongest since 1997-98 and peak near year-end, according to Australia’s Bureau of Meteorology. The weather pattern will cut production in India, the world’s second-largest producer, as well as in South Asia and Central America, Green Pool estimated.

"While last year’s threatening El Nino retreated, this year it has returned with a vengeance," the researcher said. "The effects of that are already showing up."

Sugar Prices

Raw sugar fell in the past four years in New York, the longest losing streak since at least 1961. While prices have rallied 34 percent since reaching a seven-year low in August, the sweetener is still down 6.5 percent in 2015. Contracts for delivery in the near term are more expensive than later-dated ones, a signal that supplies are tightening.

Production in India, where El Nino has reduced monsoon rains, will come to 26.5 million tons, down from a previous forecast of 27.3 million tons, according to Green Pool. Output in China will be 9.6 million tons, down from a previous estimate of 9.9 million tons and the outlook may be revised further, the researcher said. Dryness will also cut production in Central American nations and South Africa, it said.

Brazil, the world’s largest producer, will process 595 million tons of cane, 4.2 percent more than last season. Its sugar output will fall almost 4 percent to 30.8 million tons as millers direct more of the crop to make ethanol, the researcher said. Daily demand for hydrous ethanol, the kind used in flex-fuel cars, is now higher than the peak 2009 and sugar output in the European Union will decline "sharply," it said.

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