91c129fd463a
Main

Commodity Futures | Our Services

A salient feature of the world sugar market is increasing stocks. World production of sugar has been increasing for several years and as production exceeds consumption over time, stocks of sugar increase. Stocks of sugar have gotten progressively larger and larger. This, in turn, has put pressure on prices which remain at historically low levels. For 1999-2000 (September-August), the fundamental outlook in sugar is likely to remain one in which production increases and stocks increase. The trade has mixed opinions about the coming 2000-01 season. There is some opinion that the fundamentals will start to improve as the low prices cause producers to switch to other crops. Others in the trade are of the opinion that not much will change simply because producers are not very responsive to prices. At low price levels, producers do not switch much acreage to other crops. Beet sugar is an annual crop that is planted every year and if there is some price responsiveness it would be seen in beet sugar plantings. Sugar cane is a perennial crop and its production is not likely to change much due to prices. One factor that could change the amount of sugar produced is the weather. World production of sugar in 1999-00 has been variously estimated at between 132 and 136 million metric tonnes (raw value). World production has been trending higher and with that stocks have increased. Brazil remains the dominant producer of sugar and the largest exporter. Much of the increase in world production over the last ten years can be attributed to increased Brazilian production. Production in the 1999-00 season is likely to approach 18-20 million tonnes. The larger Center-South crop was excellent while the smaller North-Northeast cane crop was damaged by dry weather. Sugar exports were on a record pace late in the shipping season. The situation in Brazil is always complicated by the fact that a lot of sugar cane in Brazil is turned into alcohol which is used for fuel. If the supply of alcohol increases and alcohol prices decline, more sugar cane will be processed into sugar. Current low prices for sugar are leading some in the trade to conclude that Brazilian producers will move more of the 2000-01 crop into alcohol production. If that occurs to a significant degree it could have a major impact on the market because of Brazil’s dominant position as an exporter of sugar. If Brazil does produce less sugar in the 2000-01 season, which for Brazil starts in May, then a number of other countries could be in a position to expand production. One notable example is Cuba. In the 1998-99 season, Cuba produced 3.8 million tonnes of sugar which was up from the very low production of 3.3 million tonnes in 1997-98. In the 1999-00 season, it appears that Cuba will produce close to 4.1 million tonnes. Much of the increase in Brazilian production in the last few years came at the expense of declining Cuban production. If Brazil were to reduce production in the 2000-01 season, Cuba would likely increase production and exports. Another country that has increased sugar production is Thailand with output in the 1999-00 season expected to top 6 million tonnes, almost 20 percent more than in 1998-99. Next to Brazil, India is the largest single country producer of sugar. For the 1999-00 season, sugar production was estimated at between 16 and 18 million tonnes. It is expected in the trade that the 2000-01 season will see India produce less sugar. Australia is a larger producer and exporter of sugar. The 1999-00 crop was estimated at 5 to 6 million tonnes with exports expected to be about 75 percent of production.

See also  Silver Seasonal Chart