Mr. Orive forecasts “a global sugar deficit of about 3.5 million tonnes in 2019-20, growing to nearly 6 million tonnes in 2020-21, compared with global surpluses of 2.1 million tonnes in 2018-19 and 9.7 million tonnes in 2017-18.”
“The world is still suffering from high accumulated stocks that will need to be absorbed by the market before we can see any improvement on price,” Mr. Orive explained.
Mr. Orive is optimistic because production from major sugar suppliers appears to be declining, which will let stocks fall.
So, this sounds like the oversupply of recent years is in the process of turning into a global deficit.
Mr. Orive continues:
We’re getting killed with consumption. The “war” on sugar, including sugar taxes in many countries. Recent years have shown a trend toward a slow but steady erosion in consumption. Annual consumption growth was about 2% in the mid-2000s but currently is below 1.5%. A considerable part of losses in consumption growth rates can be attributed to a slowing down in global population growth. But the sugar and health debate is starting to take its toll with the 2019-20 growth rate close to 1.39%.
And then you have the big picture supply-demand factors suggesting a gradually declining demand for sugar. This obviously offsets the global deficit that is brewing.
The unpredictability of the Sugar Market and How It Affects Our Sugar Price Prediction
According to Jack Roney, director of economics and policy analysis for the A.S.A., the global sugar market is the most distorted commodity market in the world because of subsidies. “Today’s low prices are a result of these subsidies, and any bullish signals can be quickly undone by government intervention.”
Unpredictability of the Sugar Market and How It Affects Sugar Price Prediction
Mr. Roney said the extreme volatility of the world market is the reason the United States has a sugar policy, and he urged governments around the world to put an end to competing subsidies.
“U.S. farmers are highly efficient, and we want to operate in a free market, but that cannot happen until all countries set aside their subsidies and let a real market form,” he concluded.
This obviously is a hugely important factor to take into account in the context of our sugar price prediction. Supply-demand factors in the global sugar market are certainly a leading indicator of the price of sugar. But an unpredictable sugar market that can change fast, where the weather can turn the market upside down, or a country suddenly can influence market dynamics makes a reliable prediction extremely challenging.
As an illustration, this article on Indiatimes.com suggests that rising exports from India would lead to lower stock levels and consequently a mildly rising sugar price going into 2020. Based on a report the predicted sugar price rise is 8%.
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