According to Companion
Demand exceeds supply
Global sugar prices are still trying to recover from the 10-year low recorded in 2018.
The price of this item is currently at nearly 12 US cents / lb (1lb = 0.44kg), up 7.24% from the previous month, but still down 3.42% over the same period in 2019.
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Workers unload imported road sacks on trucks in Semarang, Indonesia. Image: AFP / TTXVN. |
This shows that global sugar price growth is still slow and the momentum is quite fragile for the rest of this year.
This situation is making it difficult for sugar mills to make profits, forcing them to find ways to save costs instead of investing in new plants.
World sugar production in the 2019-2020 season is estimated to drop to around 175.1 million tons, significantly lower than the estimate made 6 months ago and far below the sugar output achieved in the 2018-2019 season. is 184.9 million tons.
Global sugar consumption is estimated to increase by only 0.9% in the 2019-2020 season to 185.6 million tons, due in part to a change in drink habits, especially in sugar producing countries.
However, sugar consumption continues to grow faster than production, meaning a shortage of sugar may lead to short-term problems.
The US Department of Agriculture (USDA) forecasts that in the current crop, the world sugar market will have a shortage of 6.1 million tons, the largest deficit in at least a decade, although Brazil’s sugarcane production will record high of nearly 40 million tons.
The sharpest drop in sugar production is forecast to be from Asia, especially in India and Thailand, where production is estimated to decline by 10.6 million tons.
Due to unfavorable weather conditions in the US, sugar production in Central and North America will witness a decline in the 2019-2020 season.
European sugar production will also go down, mainly in EU member states and Ukraine, but these losses will be offset by bumper sugar beet harvests in Russia.
Depending on the weather, analysts predict that South American sugar production will go up in this season, largely because Brazilian factories adjust the amount of raw sugarcane to produce more sugar. more than ethanol production, when the demand for this type of fuel has dropped significantly since countries imposed a blockade to prevent the spread of the Covid-19 epidemic.
Meanwhile, the production of sugar in Africa and Oceania is also expected to increase slightly.
The rise is unsustainable
There are three main reasons for the recent rise in sugar prices.
The first is due to a sharp recovery in crude oil prices (sugar often fluctuates in the same direction as oil prices because when oil prices rise, sugar mills will increase ethanol production and reduce the amount of sugarcane used to produce sugar).
The second is the gradual relaxation of the blockade related to the Covid-19 epidemic, thereby pulling up both fuel demand and sugar demand.
The third are forecasts on the prospect of supply shortage in the world sugar market in the 2019-2020 and 2020-2021 seasons.
However, the current upward trend of sugar prices is considered by the experts to be unsustainable, when oil prices are likely to turn down in the near future, together with the Organization of Petroleum Exporting Countries (OPEC). partners, called OPEC +, have just agreed to extend the agreement to cut production by 9.7 million bpd through the end of July 2020, and signs that some OPEC + members are no longer too ” salty “with this deal.
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People switch sacks of sugar in Bantul, Indonesia. Image: AFP / TTXVN. |
Meanwhile, the risk of a second wave of Covid-19 infection is also threatening the demand for sugar, as the number of cases in many countries is increasing rapidly again with the progress of loosening policies on distance. society.
Crop prospects 2020-2021
The latest USDA report makes the first forecasts for the 2020-2021 crop.
Accordingly, under normal weather conditions, global sugar production in the coming crop is expected to increase 13.1% compared to the current crop, reaching 188 million tons, thanks to Brazil, India and Thailand – the top three sugar producers in the world – increased.
Meanwhile, the USDA said that sugar demand also increased in the same period, up 3.6% compared to the 2019-2020 season, mainly due to strong demand in South Asia and Southeast Asia.
This will reduce the global reserve utilization rate to 24.4% this season.
In Thailand, a severe drought from December 2019 to February significantly affected sugarcane production and brought the country’s sugar output down by 43.4% in the 2019-2020 season.
This is also thought to be one of the main causes of global sugar shortages in the current crop.
Under normal weather conditions, USDA expects Thailand’s sugar production in the 2020-2021 crop to be 12.9 million tons, equivalent to historical highs, with exports expected to increase to 11 million. ton.
Also according to USDA, Brazil’s sugar production in the crop year 2020-2021 is expected to increase by 9.6 million tons to 39.5 million tons thanks to favorable weather and the proportion of sugar cane used to produce sugar increases. Brazil’s sugar consumption is forecast to be stable.
India’s output is expected to increase by 17% to 33.7 million tons due to favorable weather and policies to encourage planting and harvesting sugarcane, while domestic demand also increases, so exports are forecasted to be stable. at 5 million tons
