This year has been pretty ordinary for the global sugar industry as a whole. The old adage that sugar operates in a bear market with the odd bull spike, has defined it. We had the latter for the previous two years as drought impacted crop production in top producing countries in Asia (India and Thailand) and Brazil. The sugar price at the beginning of the year was around USȼ21/lb. This has dropped to currently around 15ȼ amidst global surplus.
Return of normal weather is driving production in Asia. Pakistan is arguably the rising star, eclipsing India as the likely wild card in tipping balance in global price movement. According to FO Licht data, the 2017/18 sugar output is forecast to increase to over 8.4 million tonnes (mlt) from estimated 2016/17 at 7.7 mlt (against the local demand of 5.7 mlt) as cane acreage increases from 1.95 million acres (0.79 mln ha) to 2.13 mln acres (0.86 mln ha). Reform of the EU sugar regime has resulted in major sugar companies expanding output, adding to the global surplus and casting a long shadow over the competitiveness of the standalone refineries in the Gulf states while in 2009/10 to over 6.7 mlt in 2017/18 – giving it an exportable surplus of around 300,000 tonnes.
Hurricane Irma during September caused significant damage to the sugar industries in Cuba and Florida, but this has caused little impact on global sugar price. Arguably, what is concentrating the minds of the industry executives and analysts is the onslaught on sugar by health campaigners. Combination of persistent negative press and politicians not only in the west, jumping on the bandwagon to tax mainly sugar-sweetened drinks, are having an impact on demand. Some leading analysts have predicted a significant drop in the rise in demand annually from 2% to around 1%. But not all analysts, notably the OECD1, predict a significant squeeze on demand. Indeed, there appears to be “little statistical evidence proving either the slowing down in growth rates or decreases in per capita consumption in recent years at the global level.”
While the per capita consumption has been dropping in the West, the emerging and developing economies continue to be major drivers of consumption growth. Besides the mix of rapid urbanisation and rise in middle classes fueling demand in these economies, particularly via the use of industrial sugar, mobility revolution which has promoted overseas travel has fostered exposure to foods of other countries impacting changing tastes in local fare. “Every year, an estimated 320 million people fly to attend professional meetings, conventions, and international gatherings – and their numbers are steadily growing.”
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