Sugar industry likely to see record global production of 192m tonnes
Comment of the Day

December 19 2017

Commentary by Eoin Treacy

Sugar industry likely to see record global production of 192m tonnes

This article from UKRAgroConsult may be of interest to subscribers. Here is a section:

According to Informa's Agribusiness Intelligence, an industry research and analysis firm, the biggest driver behind the record output this year will be the European Union, India and Thailand.

Despite this, sugar cane diversion to ethanol production in Brazil means global prices will remain high as the country will produce less sugar in 2018-19.

Agribusiness Intelligence said that in October, for the first time in more than a year, there was a year-on-year increase in local sales of ethanol of 11% in Brazil. This accelerated to a plus of 16% in the first half of November.

"The most important reasons for the attractiveness of ethanol versus sugar are: the relatively high price of gasoline at the pump, an advantageous tax structure, recovering fuel demand as the Brazilian economy is moving out of recession and the low sugar price."

Meanwhile, within the EU, the market is still responding to the scrapping of production quotas for sugar refined from sugar beet, which is creating a huge jump in production. In the EU, 20 million tonnes of sugar will be produced by the end of 2017-18 which is an increase of 3 million tonnes compared to the previous year.

"This growing trend has not been supported by domestic consumption which has been declining in the EU steadily over the last few years. This will have a direct impact on the trade balance of EU countries, with imports declining and exports could double to as much as 4 million tonnes by the end of 2017-18," the analysis firm added.

Eoin Treacy's view

Synchronised global growth helps to boost demand for all commodities but energy is particularly affected since OPEC is attempting to curtail supply. That is helping Brent Crude prices hold above the $60 area. Meanwhile it improves the allure of producing ethanol for Brazil because of the arbitrage consumers benefit from as long as sugar prices are low.

Sugar bounced today to hold the progression of higher reaction lows within its developing base formation. A countermanding downward dynamic would be required to question near-term scope for a further unwinding of the short-term oversold condition, while a sustained move above 15¢ will be required confirm a return to demand dominance.  

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