Kingsman Cuts Sugar Deficit Forecast by 29% on Giant Brazil Crop

  • Brazil center-south output seen at record 36.4 million tons
  • Global sugar shortages to widen in 2016-17 on Asian crops

A record sugar crop in Brazil’s center south, the main growing region of the world’s largest producer, means this season’s global shortage will be 29 percent smaller than previously thought, according to Kingsman, a unit of S&P Global Platts.

World production will fall short of demand by 5.48 million metric tons in the season started last October, down from an earlier estimate of 7.67 million tons, the researcher said in a report. Output in the Brazilian region will climb to 36.4 million tons, 3.7 percent more than an earlier forecast. That would be a record, data from industry group Unica showed.

"Higher production is expected in Brazil, especially in the second and third quarters," Kingsman said. "There is no doubt about the large amount of cane standing and waiting to be crushed in center-south Brazil."

Sugar futures traded in New York jumped 30 percent over the past year as the market switched to a deficit after years of oversupply, while another shortage was forecast for next season. Surplus stockpiles accumulated in the previous five seasons will disappear next year, the International Sugar Organization said Friday.

Cane Crush

Millers in Brazil’s center south will crush 638 million tons of cane and direct 44.7 percent of the raw material to making sugar, according to Kingsman. That’s more than a previous estimate of 44.2 percent. Factories will favor making the sweetener because prices offer better returns than for producing ethanol, which will suffer from a 2.3 percent decline in fuel demand caused by the country’s deepening recession.

While Brazil is boosting supplies for now, global shortages will widen to 7.3 million tons in the 12 months starting October as dry weather hurts crops in Thailand, according to Kingsman. Output in the Asian nation, the second-biggest exporter, will be 9.6 million tons in 2016-17, 18 percent less than an earlier forecast.

Sucres et Denrees SA on Thursday forecast that the global sugar market will shift to a “slight” surplus in 2016-17, partly as crops recover in drought-ravaged areas of Asia. The Paris-based trader expects a deficit of about 5 million tons this season.

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