A worker measures sugar. Picture: REUTERS
A worker measures sugar. Picture: REUTERS

London — World sugar prices are forecast to rise this year with the market swinging into deficit in the 2019/2020 season, a Reuters survey of 10 analysts and traders showed on Monday.

Raw sugar prices were expected to end the year at US14.60c per pound, up 15% from Friday’s close, according to the median forecast of responses.

The world sugar balance was seen switching to a deficit of 1.90-million tons in 2019/2020 compared with a surplus of 2.55 million in 2018/2019.

The shift was partly driven by a forecast fall in India’s production to 29.50-million tons in 2019/2020 from 32-million tons in 2018/2019, according to the poll.

Respondents said potential exports from India, where stocks have been climbing, may limit the scope for a rise in prices while the relative profitability of sugar and ethanol production in Brazil would also have a major influence on prices.

Depressed sugar prices have led Brazilian companies to increase their capacity to produce ethanol, with many mills able to switch between using cane to produce sugar or biofuel ethanol depending on which is more profitable.

The size of any deficit will also help determine the extent of any rebound with weather likely to play a key role.

“If it is predicted that 2019/2020 will see a sizable global deficit - over 5-million tons - then prices could rally significantly. If the deficit is seen to be closer to flat or even a small surplus then any price rise will be very minimal,” one respondent said.

White sugar prices were expected to end the year at $391.50 per ton, up 17% from Friday’s close.

Another respondent said the potential for a reduction in EU beet planting in 2019 could significantly tighten the white sugar market.

The sugar industry has been in turmoil since the EU scrapped production and export quotas in 2017, prompting many producers to boost output just as sugar prices collapsed under pressure from large world stocks.

EU sugar companies are now responding to depressed prices by cutting back production.

“We think that the price of sugar this year will be supported by Brazil diverting its sugarcane harvest into ethanol production and reports that European farmers are switching from sugar beet into more profitable agriculturals,” Capital Economics analyst Caroline Bain said.

“But a weaker Brazilian real and bumper crops in India ought to keep prices in check.”