India plays a crucial role in the sugar market

There is again light on the horizon for the sugar market. After years of overproduction and large stocks, a situation of dwindling stocks is in sight for the first time. India is currently the uncertain factor in the global sugar market, taking the place of Brazil.

While the sugar market has been characterized by oversupply in recent years, this is gradually stabilizing. Last year the sugar market still had to deal with an oversupply of about 10 million tons, now the surplus is 0,6 million tons. Rabobank analysts to expect that this will change into a shortage of approximately 4,2 million tons in the 2019/2020 season, although stocks remain high. Sugar prices are expected to rise to around €261 per tonne by the end of this year and could rise further to €265 per tonne over the course of next year.

Lower production
This is due to lower production in India due to drought. The expected yield is 5 million tons lower than last year's yield (more than 33 million tons). Lower production is also expected for the European Union and Thailand, partly due to smaller areas. As a result, global inventories will shrink. This will create a more positive mood on the sugar market and the price is expected to rise slightly.

While analysts expect the price to rise, there are still uncertainties. For example, the second largest sugar producer; India, huge stocks. While this creates the unusual situation of the sugar cane being used for animal feed, there remains a risk that India will enter the market with large amounts of sugar.

Controversial export subsidies also play a role in this. Competing countries (such as Brazil and Australia) have sued India for this at the World Trade Organization (WTO). However, this will not prevent the export subsidies from being issued in the short term. Another risk is that not only traders and farmers trade on the sugar market. About 35% are speculators. As a result, the market can change quickly.

Demand for ethanol positive
In general, Brazil plays the most important role in the sugar market. This year, however, the country is less actively involved, because Brazil is focusing on the production of ethanol. Farmers get higher prices for this. This is also apparent from the fact that the export figures are 20% below those of the past 10 years. This is expected to remain the case for the foreseeable future, as China will add 2020% ethanol to its fuel by 10, thereby maintaining ethanol demand.

Anne-Jan Doorn

Anne Jan Doorn is an arable expert at Boerenbusiness. He writes about the various arable farming markets and also focuses on the land and energy market.

aj.doorn@boerenbusiness. Nl

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