Wednesday 13th Dec, 2017

INFOGRAPHIC: Sugar figures remain sour for cane growers

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RETURNS to Australian cane growers are forecast to average 8% less in the 2017/18 season, as a result of a significant oversupply in the global sugar market, the Department of Agriculture has said.

Recent data from the Department estimates Australian growers will see around $44 a tonne for their crushed cane in 2017/18, down from $48 a tonne in the prior season.

The soft figures follow earlier forecasts from the Government, suggesting the global price of sugar will drop to historic lows in the next 12 months.

“The world indicator price for raw sugar … is forecast to fall by 24% in 2017/18 to average US13 cents a pound,” the Department’s September update states.

The price dip is set to be driven by record production in several of the largest producers of sugar around the world.

Graph: Oliver Probert
Graph: Oliver Probert

“Most forecast production growth is expected to occur in Asia and Europe,” the report says. “Global supply is expected to grow faster than demand during 2017/18, leading to this significant fall in price.”

Overall, world sugar production is forecast to rise 7% in 2017/18, to 190 million tonnes, slightly higher than the Government’s earlier forecast.

“Production is forecast to increase in Brazil, China, the European Union, India, Thailand and other smaller producing countries,” the new update says.

Sugar production is forecast to increase in Brazil – the world’s largest producer – by 1%, to 40 million tonnes.

Graph: Oliver Probert
Graph: Oliver Probert

“This is in response to relatively high sugar prices compared with ethanol and despite a forecast 3% decline in cane production. Around 47% of cane crush is expected to be allocated to sugar production in 2017/18, up from 46% in 2016/17.”

Production is expected to rise 15% in China to 12 million tonnes, and by 18% in Thailand, to 12 million tonnes, due to higher relative returns, increased yields and a return to average monsoon rains during the 2016 planting season.

Average monsoon rains and higher yields are also expected to boost sugar production in India, where the Department is forecasting an 11% growth to around 27 million tonnes in 2017/18.

And in the European Union, the abolition of EU production quotas in October 2017 is expected to result in an 18% rise in sugar production to around 20 million tonnes which, if realised, would be the highest EU production total since 2005/06.

While the report estimates the price drop will make sugar more competitive against high-fructose corn syrup, resulting in a slight increase in the global consumption, this rise will not be enough to outweigh the significant rise in production, resulting in a 7% rise to world sugar stocks by the end of 2017/18, to 76 million tonnes.

Graph: Oliver Probert
Graph: Oliver Probert

In Australia, dry seasonal conditions in southern Queensland, and damage caused by Tropical Cyclone Debbie, will cut production, but this is forecast to be balanced out by a 5% rise in commercial cane sugar content, leaving overall sugar production largely unchanged at around 4.8 million tonnes.

Graph: Oliver Probert
Graph: Oliver Probert

While this will translate to a largely unchanged export figure of 4.1 million tonnes, the global price drop will mean sugar exports will be worth just $2 billion, down 12%, in the 2017/18 season.

Oliver Probert is the editor of Rail Express

From the print edition September 28, 2017

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