Forecasts about global sugar production and prices remain good as long as the weather does not undergo any significant changes in pre and during harvesting season. Moreover, factories — particularly in the world’s largest sugar-producing and -exporting country Brazil — committing a greater percentage of sugarcane to ethanol production, moved by rising crude prices, could make an impact on world output and balance of sugar. In this context is to be seen the latest forecast by the US Department of Agriculture that global sugar production for the 2017–18 season (October to September) is likely to be up 13mt (million tonnes) (raw value) to a record 185mt.
But a caveat will be found in the sentence from USDA forecast: “If reached, production would be 20mt higher than the five-year low just two years earlier.” USDA says that based on “favourable weather, improved crop management and lower use of cane for ethanol.” As would be the case, sugar production in Brazil’s centre south region, which has more than 90% share of the sweetener started tailing off unusually early this season because of rains hampering harvesting in important growing centres. Equally importantly, a lot more sugarcane is used for making ethanol this season as high crude prices have tilted the balance in its favour. In the concluding weeks of Brazilian sugar production for the season, enticed by growing demand and prices for the alternative fuel extracted from sugarcane, factories started committing more of the crop for ethanol production. Brazilian factories are found to be using only 36.8% of sugarcane for making sugar against 40% considered to be the floor.

An official of the Brazilian industry association UNICA said: “In the final months of the harvesting cycle, it is natural for sugar production to decline. This time, however, the trend was intensified by the relative prices between sugar and ethanol that were more attractive for the latter.” Whatever the shortfall in Brazilian production, fundamentals “continue to point to a large global surplus” because of expected higher output in India, Thailand and the European Union,” says Sucden Financial. Indian industry official Om Dhanuka is not sure if Brazil lately constrained by rains driven production constraints will be in a position, as USDA has projected to step up exports by ‘’1.1mt to a record 29.6mt... despite China’s safeguard measure to limit imports from China.’’


Benefiting from a good monsoon after two consecutive years of severe drought in important sugarcane growing states such as Maharashtra and Karnataka, India is poised for a major revival in sugar production to 25.1mt during 2017/18 from a low of 20.3mt last season. Dhanuka hastens to point out that twice in the current millennium, the country had produced well over 28mt of sugar underscoring the possibility of India generating exportable surplus on a sustainable basis, if government policies are supportive. According to Indian Sugar Mills Association President (ISMA) Ms T Sarita Reddy, India’s sugar consumption — after taking into account the routine annual demand growth — will equal production leaving the country with 3.9mt of inventory at 2018 September end, the same as this season’s opening stocks.

A lobby made of a few millers having built coast based refineries engaged in turning raw sugar to make it white and then export or sell within the country is pitching for imports citing the expected fine balance between production and consumption could at some point create shortages fuelling prices. But this supposition is hotly contested by ISMA director general Abinash Verma who says ‘’we don’t foresee any need for imports at any stage this current season.’’ Last season too, the lobby pressured the government to sanction imports of up to 3mt. But Sarita and her ISMA colleagues were able to convince New Delhi that imports of 500,000 tonnes would be sufficient to take care of shortages in drought ravaged Maharashtra in the west and two southern states,Tamil Nadu and Karnataka in particular.

Dhanuka says ‘’the challenge will be in 2018/19 when helped by good rains in 2017 that left the fields ideal for sowing and brought water levels in reservoirs used for irrigation to normal or above normal the country is set to produce sugar in excess of its own consumption and end season stocks requirements. Exports offer the option to rid the country of the expected surplus.’’ Depending on domestic supply situation in the past, India had been either been an importer or exporter or just self- reliant in sugar. In recent times, India has records of exporting close to 5mt in 2007/8 and importing nearly 4.1mt in 2009/10.
Supply surplus leads to sugar price falls making it difficult for factories to pay farmers in time for sugarcane supplies. In anticipation of surplus a year hence, Verma has made a representation to the New Delhi to intercede with Bangladesh and Sri Lanka to allow India to export sugar without inviting import duty. India’s two neighbours between them import over 3mt annually. But Bangladesh has an import levy of $150 a tonne on sugar and Sri Lanka $100. On the strength of its free trade agreements and also SAFTA agreements, India will be seeking import duty waiver.
Like India Thailand has made remarkable recovery in sugarcane plantation this season. This is likely to lift the country’s sugar production by 12% to approximately 11.2mt. Industry officials say as Thai plantations made a remarkable recovery to achieve sugarcane production of 105mt helped by favourable weather during vegetative growing cycle, factories remain engaged in promoting sugarcane acreage extension to match the industry’s crushing capacity extension. Thailand is likely to export 9mt in 2017/18, including 4mt of
raws and 5mt of refined white.
Australian sugar production expected at 4.8mt marking a decline of 6% on the previous season would have been still lower had the tropical cyclone on northern growing areas of Queensland inflicted greater damage on the sugarcane crop. Sugarcane in Australia is now in competition with crops such as avocado and macadamia for land. Despite the expected fall in production, Australian exports are to remain stable at 3.7mt. China, Indonesia, Japan and Malaysia are the major markets for Australian sugar. Following the sectoral reforms, the European Union will see production rising to 19.6mt. Acreage expansion will lift Chinese output by at least 1mt to 11.5mt. Even then China will end up importing larger quantities than 6mt in 2016/17. The country will also be releasing 1.5mt from state reserves against 1.25mt last year.
As for price prospects, Citi Research says the expected global sugar surplus in 2017/18 will cap realizations in the first half of 2018. But later in 2018, prices are likely to rise resulting from the Brazilian move to reduce the amount of sugarcane factories are using to make sugar.
Kunal Bose