ED&F Man Sees Second Year of Sugar Surplus

Good crops in Europe and India will probably extend a global sugar surplus for a second year, according to ED&F Man Holdings Ltd.

Supplies are likely to outpace demand again in the season that starts in October, Kona Haque, head of research at the London-based trader, said in an interview before the Dubai Sugar Conference. That follows a glut of about 7 million to 8 million metric tons in 2017-18.

Sugar processors in the European Union have already signed contracts with beet farmers and the cane that will be cut for the next Indian crop is already in the ground, she said. Traders will be closely watching forecasts for next season as prices have already tumbled 36 percent over the past year.

"The EU beet crop should be big again, the same with India," Haque said in London. "It’s only in 2019-20 that we don’t know what either the EU beet farmers are going to do or what the Indian crop is going to be like."

EU producers boosted output this season as regulators liberalized the market and exports from the 28 member nations look on track to exceed 3 million tons, according to ED&F Man. In India, higher yields and better weather have prompted the trader to raise its forecast for 2017-18 by 500,000 tons to 27 million tons, Haque said.

Brazil Ethanol

Higher ethanol prices will prompt some millers in top producer Brazil to switch to the biofuel in the 2018-19 season that starts there in April. While that will help the market, it would not be enough to offset the surplus elsewhere, she said. ED&F Man expects sugar production in Brazil’s main producing region to drop by about 3 million tons.

Another surplus doesn’t necessarily mean two years of falling prices, Haque said. The economic environment is favorable and the commodities market has already seen the positive impact of global growth and a weak dollar on energy and metals. The position that hedge funds take will also influence prices.

"What I’m saying is that it doesn’t necessarily mean we are going to be bearish for the next two years," she said. "If 2019 turns, the funds will start anticipating that well ahead."

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