A healthy rally that drove raw sugar prices to a more than four-year high in late 2016 is expected to fade in 2017, as Brazil’s main producing region looked set for record output that will reduce a world supply deficit, a Reuters poll showed.
The deficit will disappear in the upcoming 2017/18 crop year, according to the median estimate from Reuters’ poll of 18 traders, analysts and industry experts, as last year’s rally in prices raises production expectations. The global market shifted to a deficit last year after half a decade of surplus production.
Brazil’s bumper crop may cap further gains in benchmark raw sugar prices on ICE Futures U.S., which were expected to be little changed at 21 cents per lb by the end of the first quarter, according to the median estimate.
Those surveyed pegged the price at 21.25 cents by the end of the year, up 1 percent from current levels. Prices touched a more than four-year peak near 24 cents in October.
Millers in Brazil’s main center-south region will direct more than 47 percent of their cane crop to sugar output in the 2017/18 harvest, which begins in April, according to the poll.
That would be the most of the crop they have dedicated to the sweetener since the 2012/13 season, according to cane industry data. Brazil’s millers can produce sugar or ethanol from their cane.
The median estimate put Brazil’s center-south sugar production at more than 35 million tonnes next season, surpassing the record reached in the harvest that just ended.
Gains in ICE white sugar prices were expected to be greater by the end of 2017. The median estimate put prices by the end of March up 1 percent at $555 per tonne but up more than 10 percent at $605 by the end of the year.
The median estimate pegged a world shifting to a balanced market in 2017/18 from a deficit of 5 million tonnes in the current crop year through the end of September.