SUGAR’S DEJA VU The biennial London sugar dinner is nearly upon us. As usual the


global sugar industry descends on London for several days during the second week of October for meetings, networking and the chance to catch up with old friends. Unsurprisingly, one of the main topics of conversation will be the state of the market and expectations for the next few months.


Sadly, the mood is likely to be rather negative and depressed. Since the last dinner, prices have collapsed. Back in October 2016 the market was at a heady 23.50 cents. This August prices fell to their lowest level in ten years dipping, albeit momentarily, into single digits, hitting a low of 9.91. Of course the over-riding reason for the fall has been a huge over production of sugar.


The 2017/18 (Oct to Sept) season has been extraordinary in many ways. Unprecedented perfect weather for growing sugar cane and beet was seen right across the globe. Virtually all the world’s major producers; Brazil, India, Thailand, the EU and the United States, produced record amounts of sugar. However, it was the huge increase in India, Thailand and the EU that bamboozled analysts. The EU increase was not entirely a surprise given it was the first season farmers and processors were not encumbered by the constraints of the sugar regime but ideal growing conditions saw unexpected yields. Even more unforeseen was the unbelievable amount of sugar produced by India and, to a lesser extent, Thailand. India easily surpassed their previous record by several million tonnes to hit over 32 million tonnes, with Thailand hitting 13 million tonnes which will see it maintain its place as world’s second largest sugar exporter after Brazil. All this against a back drop of stagnating demand as health concerns over eating sugar filters through to consumption. This has meant that a huge global surplus of around 19 million tonnes has been produced.


Unfortunately, things do not look much better for the 2018/19 season which starts on 1 October. While sugar production in Brazil is likely to plummet and the EU’s production will drop, it is expected that India and, possibly Thailand, will produce another season of record production. Although it is early days, analysts currently see another global surplus of around 4-5 million tonnes. This would mean a combined consecutive two year surplus of a record 23-24 million tonnes.


This excessive production saw prices dive to their lowest level since 11 June 2008 and well below cost of production for all. Needless to say, the question on everyone’s lips is whether there is any light at the end of this long tunnel and when prices will improve significantly.


It should be first remembered that over the past nine seasons (including 2018/19) a surplus has been seen seven times with just a couple of years of deficit. Since 2010/11 it seemed the only factor that governed production was the weather. Consecutive poor Asian monsoons in 2015/16 and 2016/17 were the main reason for the two global deficits. The convention that overproduction of any commodity leads to prices falling to a level which then prohibits further production did not seem to work with sugar. Indeed, it seemed as if Asia , actively, tried to wrestle market share away from Brazil. This is something that could only happen when prices are low. It is virtually a forgone conclusion that in 2018/19 India will become the world’s largest sugar producer for the first time, usurping Brazil by, possibly, 5 million tonnes. This could have happened a season earlier if it was not for the collapse of the Brazilian real in 2015, which meant that Brazilian millers could price at much better levels than had been expected.


4 | ADMISI - The Ghost In The Machine | September/October 2018


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36