CATCH THE BUZZ – More Sugar Consumed Than Grown This Year. Prices will Rise.

Alan Harman

Global sugar consumption is set to outstrip supply this year, but despite doom and gloom reports of the world running out of the sweet stuff, analysts say the sector is well-placed to meet the demand.

Global consumption is seen rising 1.7% to 184 million tonnes in 2015-16, while production is predicted to fall 3% to 177 million tonnes for the year ending in September.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) says if this happens, world sugar consumption will exceed world production for the first time in six years.

And while there are overseas media claims the on-going El Niño event has brought on a worldwide sugar shortage with droughts in India, Thailand, and China, there will still be plenty of sugar to go around.

ABARES say world closing stocks of sugar are forecast to fall from a record 77.8 million tonnes in 2014-15 to 71 million tonnes in 2015-16. The stocks had increased significantly between 2010-11 and 2014-0-15.

“In 2016-17 continued growth in sugar consumption is forecast to result in a further 6% fall in world stocks to around 67 million tonnes.,” ABARES sugar industry analyst Benjamin Agbenyegah says in the organiszation’s quarterly commodities report.

The run on sugar is expected to boost prices.

ABARES says the price is projected to average 16 U.S. cents a pound in 2020–21 based on an expectation that world sugar consumption will continue to exceed production and lead to reduced world stocks.

The indicator price is forecast to increase 5% in 2015-16 to average 14 U.S. cents a pound. In 2016-17 the price is seen rising 11% to average 16 U.S. cents a pound.

This year’s increase in consumption is driven by an increase in demand for sugar from food processing industries in developing Asian countries, particularly China, India and Indonesia, and Brazil.

The fall in production is from lower production in China, the European Union and India only partially offset by increases in Australia, Brazil, Thailand and the United States.

World sugar production is set to rise 3% in 2016-17 to 183 million tonnes, largely reflecting production increases in the European Union, China, Brazil and India.

EU sugar production will rise 29% to 19 million tonnes, with Chinese output rising from 10.3 million tonnes in 2015–16 to 12 million tonnes in 2016-17 and Brazil rising 5% to 40 million tonnes,

Consumption is set to grow by a further 1% to 187 million tonnes, supported by income and population growth in non-OECD countries. China, India and Brazil are expected to account for around 95% of forecast world consumption growth.

World sugar exports are forecast to be 66 million tonnes in 2015-16, up from 64 million tonnes in 2014-15. Sugar supplies available for export are forecast to be higher in Brazil, Thailand, India and Australia. Exports are seen rising another 10% in 2016-17 to 72 million tonnes.

Consumption is projected to increase by an average of 2.5 million tonnes a year over the medium term, to reach a record 197 million tonnes in 2020-21 thanks to a rising world population and continued income growth in non-OECD countries, particularly in India, China, Brazil and Indonesia.

Over the same period, ABARES sees production growing at an average annual rate of 2% to reach 196 million tonnes thanks to increased production in Brazil, India, China, Thailand, Mexico, Australia and Pakistan.

With demand continuing to exceed supply, sugar stocks are expected to fall an average 2.7 million tonnes a year to reach settle at 55 million tonnes in 2020–21.

If this happens, world stocks will be at the lowest level since the 47 million tonnes in 1997-98.

There will still be plenty of sugar for the sweet-tooths of the world

Exports are projected to increase – mainly from Brazil, Thailand, Australia, Mexico and India. – at an average annual rate of 3% to a record 79.8 million tonnes in 2020–21.