Czarnikow Sees Sugar Surplus Falling 62% as Beet Output Declines

Global sugar production will exceed demand by 3.9 million metric tons next season, 62 percent smaller than a year earlier as output from sugar beets declines due to lower prices, according to Czarnikow Group Ltd.

Supply will fall to 182.8 million metric tons in the 2013-14 season that starts in October in most countries from a record 185.6 million tons this year, the London-based company, which traded 2.4 million tons of raw sugar last year, said in a statement today. Consumption in 2014 will rise 2 percent, the most since 2008, to 177.9 million tons, it said.

While production from sugar cane will rise 300,000 tons to 148.5 million tons, beet-producing nations will make 34.3 million tons, down 8.3 percent from a year earlier. Output from beets will drop as the crop, unlike cane, is planted annually and therefore is more sensitive to prices, Czarnikow said. Raw sugar traded in New York fell 16 percent this year.

“We continue to expect 2013 to be difficult for producers forced to accept earnings below production costs,” Toby Cohen, a director at the company which sold more than $3 billion of sugar last year, said in the statement. “Growers will have to adapt to lower incomes or delayed cane payments.”

Raw sugar futures are down to 16.45 cents a pound on ICE Futures U.S. in New York today, after falling 16 percent last year and 27 percent in 2011, the most in a decade. A third consecutive annual drop would be the longest slump since 1992. Ths surplus in 2012-13 is 10.2 million tons, Czarnikow said.

Brazil Expanding

The sugar cane crop in Brazil’s center south, the main growing region of the world’s biggest producer, will be at least 600 million tons in the season started there in April, according to Czarnikow. The amount of cane processed will probably be 595 million tons and sugar production is currently estimated at 36 million tons, said Stephen Geldart, a senior analyst at the company. That’s up from 34.1 million tons a year earlier.

“Given Brazil’s ability to rapidly switch between sugar and ethanol, the 2013-14 surplus is therefore sensitive to prices and could decline should the Brazilian milling sector choose to re-focus its attention on domestic hydrous ethanol,” Czarnikow said, referring to the biofuel used in flex fuel cars.

Millers in India, the world’s second biggest grower and top consumer, will produce 25.7 million tons of sugar next season, a decrease of 6.9 percent, according to the statement. Production in 2012-13 will be 27.6 million tons, higher than a November forecast of 25.9 million tons, Czarnikow data showed.

“2013-14 cane prices are likely to be higher and this year’s monsoon is currently forecast to be near normal though drought conditions have impacted planting in the south,” said Czarnikow, which has clients in 83 countries. “We expect India to be broadly balanced in the coming season.”

Sugar production in the European Union will be 16 million tons in 2013-14, down from 16.8 million tons a year earlier, according to Czarnikow. In Russia, output will drop 17 percent to 4.3 million tons, Geldart said. Both the EU and Russia produce the sweetener from sugar beets.

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