Overview of sugar
After weakening in late 2013, international sugar prices will recover, driven by strong global demand. Exports from Brazil, the world dominant sugar exporter, will be influenced by the ethanol market.
After a fourth consecutive season of large global surplus, world sugar prices weakened in late 2013. Market fundamentals provide little support to prices during the remaining months of the current season (1 October 2013 to 30 September 2014). World sugar production is now expected to grow less rapidly at the beginning of the outlook period, signalling the end of the surplus phase in the world sugar cycle. But any world sugar price recovery is likely to be muted in the short term by the accumulation of large global stocks in a number of countries since the beginning of the surplus phase in 2011. Global stocks and the stocks-to-use ratio have reached a six year high at the start of the outlook period.
- Global sugar production is projected to increase by 1.9% p.a. over the projection period and to reach nearly 216 Mt by 2023, an increase of around 36 Mt over the base period. Most of the increase in production will originate from countries producing sugarcane rather than sugar beet, and is attributed to higher yields rather than area expansion, even though yields will continue to flatten in the short term. Global sugar consumption is projected to increase by 1.9% p.a., much slower than in the previous decade, and will reach 211 Mt in 2023. Growth in consumption of sugar will continue to be dominated by the sugar deficit regions of Asia and Africa.
- World sugar prices are expected to continue to be volatile over the course of the outlook period but will edge moderately upward on the back of rising costs of production. Prices will remain attractive enough to enhance new investments in production capacity, notably in some exporting countries facing world market prices. The raw sugar price (Intercontinental Exchange No. 11 contract nearby futures) is projected to reach in nominal terms USD 431/t (USD 19.5 cts/lb) in 2023. The indicator world white sugar price (Euronet, Liffe futures Contract No.407, London) is projected to reach USD 519/t (USD 24 cts/lb) in nominal terms, in 2023. The white sugar premium is projected to narrow over the coming decade to reach USD 95/t. Brazil’s cost of production and the allocation of its large sugarcane crop between sugar and ethanol production remains a key determinant of world sugar prices over the outlook period. World sugar prices are expected to remain on a raised plateau and to average higher over the projection period, but to continue to decline in real terms.
- Large stocks weighing on the market at the start of the outlook period are expected to slow price recovery. World sugar stocks and stocks-to-use will, nevertheless, start to decline as countries respond to lower prices with increasing consumption. While stocks are expected to show more variation in the following years, they are projected to average lower than at the start of the outlook period, and in comparison to the previous decade, providing support for sugar market prices.
- Production and consumption of high fructose corn syrup (HFCS), or isoglucose, is projected to grow by around 28 and 29%, respectively, to 2023 compared to the base period. The United States remains the leading producer, but the European Union will be responsible for a large share of the additional production in the coming decade, following the abolition of production quotas in 2017. Production will also grow in China and to a lesser extent in Mexico. These countries will also be the leading consumers. Imports and consumption of HFCS is expected to grow further in Mexico as well, as part of two way trade in sugar and HFCS with the United States in an integrated sweetener market under the North American Free Trade Agreement (NAFTA).
Figure. World sugar prices to recover in the near term and to remain on a higher plateau
Evolution of world sugar prices in nominal (left) and real terms (right) to 2023ª
Note: Raw sugar world price, Intercontinental Exchange contract No. 11 nearby futures price Refined sugar price, No. 5. Euronext Liffe, Futures Contract No. 407, London. Real sugar prices are nominal world prices deflated by the US GDP deflator (2005=1)
Source: OECD and FAO Secretariats
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