Sugar - OECD-FAO Agricultural Outlook 2013-2022

 

Sugar production will increase by almost 2% p.a., primarily from sugar cane in Brazil and India the leading producers. Developing countries will continue to dominate world sugar use and are expected to experience the fastest rates of growth of consumption.

 

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Market situation

World sugar market fundamentals are decidedly bearish at the start of the Outlook. World prices have continued to follow a downward trend in the last 12 months, and with lower price volatility, as markets adjust to a third consecutive year of a global sugar surplus.

Higher global production can be largely attributed to a recovery in output the world’s largest producer, Brazil, although harvests were also larger in the European Union, the United States, Mexico, India and China. As a result, world raw sugar prices have fallen by 26% in the last 12 months and white sugar prices by 20%. Sugar prices are expected to continue to ease back through the remainder of 2012/13 on the back of abundant supplies and increasing stock cover.

The replenishment of stocks will elevate stocks-to-use to a six year high at the start of the Outlook and effectively signal the end of the period of low stocks, which has been a feature of the past four years.


Projection highlights

  • World sugar production is projected to increase by 1.9% per annum over the projection period to reach nearly 212 Mt in 2022, an increase of around 38 Mt over the base period. Moderate yield increases, and lower than in the previous decade, will account for most of the additional production, rather than expansion of the area under sugar crops. Nearly all of the increase in sugar production is projected to originate from sugar cane rather than sugar beets. The developing countries of Brazil and India will remain the leading producers based on sugar cane.  Global consumption of sugar is projected to grow at around 1.9% per annum, slightly slower than in the previous decade, to reach 204 Mt in 2022/23.  The sugar deficit regions of Asia and Africa are anticipated to retain their dominant share of world sugar use.

  • World sugar prices are expected to continue to drift downwards in 2013/14 before commencing a turnaround and following a moderately upward trend in following years, as sugar producers adjust production and consumption continues to grow. The world indicator raw sugar price (Intercontinental Exchange No. 11 contract nearby futures) is projected at USD 439/t (USD 20 cts/lb) in nominal terms, in 2022/23. Although lower than the average world sugar price in the base period (2010-12), sugar prices are expected to remain on a raised plateau and to average higher over the projection period in nominal and real terms (when adjusted for inflation) than in the decade prior to the food crisis of 2007/08.

  • Refined or white sugar prices have also eased back at the start of 2013 and are expected to follow a similar pattern to raw sugar prices over the projection period. The indicator world white sugar price (Euronet, Liffe futures Contract No.407, London) is projected to reach USD 537/t (USD 24 cts/lb) in nominal terms, in 2022/23. A relatively large white sugar premium at the outset is expected to narrow in 2013/14 and to average around USD 97/t over the course of the outlook period, as additional white sugar supplies come on stream from new refineries.

  • Larger production in Brazil, and elsewhere, lead to additional stock replenishment and higher global stocks in the near term, adding to downward pressure on sugar prices. With variable production and steady demand growth, world sugar stocks and stocks-to-use show more variation in following years. Nonetheless, they are projected to follow a declining trend and to average lower than at the start of the Outlook, and in comparison to the previous decade, providing support for sugar prices in the later years of the projection period.

  • Most of the growth in sugar exports is expected to be captured by cane sugar producers in developing countries led by Brazil and Thailand, and with imports spread over a wider group of countries.

  • The outlook for high fructose corn syrup (HFCS) or isoglucose, a caloric sweetener that competes with sugar in certain end uses such as beverages, is for further growth in production and consumption by around 15%, respectively, to 2022/23, when compared to the base period. Most of the additional production will originate in the United States,  with HCFS competiveness determined by the price of maize and the European Union following the expected removal of production quotas during the projection period. . These countries will also be the leading consumers along with China and Mexico, the latter as part of two way trade in sugar and HFCS with the United States in an integrated sweetener market under NAFTA.