The International Sugar Organization (ISO) has revised its forecasts for the global sugar stock downwards. The sugar mountain is expected to shrink almost 4% this season to 93 million tons. Despite the anticipated shortage, sugar prices are currently moving downwards due to uncertainty about the omikron variant of the coronavirus. The 2020-2021 season has now come to an end and, according to the ISO, it will be concluded with a closing stock of 96,7 million tons of sugar. At more than 2 million tonnes, the expected shortage was slightly higher than the 1,5 million tonnes previously forecast. The new season takes it even further. If the predictions come true, there will be a shortage of 2021 million tons of sugar at the end of 2022-2,6. The closing stock will then shrink to 93,3 million tons. Previously, 95 million tons were assumed. Production mainly increases in Thailand The forecasts are mainly based on a higher consumption level. Consumption will rise 1,2% this season compared to 2020-2021 to 173 million tons. Production is also increasing, but less rapidly. A production increase of 0,9% to 170,5 million tons is assumed. This increase is mainly attributable to Thailand, where the good harvest will probably provide an additional yield of 2,4 million tons of sugar. Other sugar producers are also contributing, such as the EU (+0,8 million tons), Ukraine (+0,7 million tons) and Russia (+0,6 million tons). Europe is counting on 15,7 million tons of sugar this season. That is more than 8% more than in 2020-2021. Finally, India also contributes. To date, 0,5 million tons more sugar has been produced there than in the same period last year. Total production appears to be about 13,5 million tons, of which about 6 million tons will be available for export, which is slightly less than in recent years. However, the biggest impact on the global stock is the number 1 exporter, Brazil. Production there is expected to fall by 4 million tons this year. This is primarily due to the disappointing harvests, which are up to 30% lower, depending on the region. High oil prices also leave their mark on the sugar market. This increases the production of ethanol at the expense of the production of sugar. Despite the shortage, the price is falling Despite the revised forecast for the contraction of global stocks, the sugar market is currently not responding to this. Prices are still at a high level, but showed a decline last week. For example, the closing price on the Liffe in London did not go further than €441,21 per tonne on Monday. And that while a week and a half earlier (November 17) the highest level in more than four years had been reached, namely €463,73.
It is clear that the spread of the omikron variant of the coronavirus is not doing the sugar market any good. It creates uncertainty and fear of new lockdowns, which could have a dampening effect on global demand. It creates reluctance among many traders. Until it is clear which direction the new variant of the coronavirus is heading and the effectiveness of existing vaccines, the sugar market will be characterized by volatility.
The 2020-2021 season is now over and, according to the ISO, it will end with a final stock of 96,7 million tons of sugar. At more than 2 million tons, the expected deficit was slightly higher than the previously anticipated 1,5 million tons. The new season takes things even further. If the predictions come true, there will be a shortage of 2021 million tons of sugar at the end of 2022-2,6. The final stock will then shrink to 93,3 million tons. Previously, 95 million tons were assumed.
Production is increasing mainly in Thailand
The predictions are mainly based on a higher consumption level. Consumption increases this season by 1,2% compared to 2020-2021 to 173 million tons. Production is also increasing, but less rapidly. A production increase of 0,9% to 170,5 million tons is assumed. This increase is mainly due to Thailand, where the good harvest will probably result in an additional yield of 2,4 million tons of sugar.
Other sugar producers also contribute, such as the EU (+0,8 million tons), Ukraine (+0,7 million tons) and Russia (+0,6 million tons). Europe is counting on 15,7 million tons of sugar this season. That is more than 8% more then in 2020-2021. Finally, India is also making its contribution. To date, 0,5 million tons more sugar has been produced there than in the same period last year. Total production appears to be around 13,5 million tonnes, of which approx 6 million tons becomes available for export, which is slightly less than in recent years.
However, the biggest impact on global supplies has the number 1 exporter, Brazil. Production there is expected to drop by 4 million tons this year. This is primarily due to the disappointing harvests, which, depending on the region, are up to 30% lower. High oil prices are also leaving their mark on the sugar market. This increases ethanol production at the expense of sugar production.
Despite the shortage, the price falls
Despite the adjusted expectations regarding the shrinkage of global stocks, the sugar market is currently not responding. Prices are still at a high level, but did show a decline last week. For example, the closing price on the Liffe in London on Monday did not exceed €441,21 per tonne. And this while a week and a half earlier (November 17) the highest level in more than four years was reached, namely €463,73.
It is clear that the spread of the omikron variant of the coronavirus is not doing the sugar market any good. It creates uncertainty and fear of new lockdowns, which could have a dampening effect on global demand. It creates reluctance among many traders. Until it is clear which direction the new variant of the coronavirus is heading and the effectiveness of existing vaccines, the sugar market will be characterized by volatility.