Sugar to be in shorter supply than forecast warns ISO

LONDON: Sugar is going to be in even shorter supply than forecast this year as global output falls, the International Sugar Organization warned on Tuesday.

The London-based intergovernmental organisation raised its global deficit forecast for 2015/16 to 5.0 million tonnes, on expectations of lower output in India, Thailand, Brazil and the European Union.

The ISO had forecast a deficit of 3.5 million tonnes in November after reporting a 2.3 million tonne surplus in 2014/15 (Oct-Sept).

The revised forecast, which follows another upward revision in the 2015/16 deficit forecast by analyst F.O. Licht on Friday, had an immediate impact on sugar prices, with the ICE raw sugar contract rising by more than 7 percent.

The ISO said it expected global sugar output of 166.8 million tonnes in 2015/16, down from 171.2 million in 2014/15.

"Although 2015/16 is expected to be the third consecutive season of shrinking global output, for the first time since 2008/09 the production fall is so pronounced as to exceed 4 million tonnes," it said.

Sergey Gudoshnikov, a senior economist at the ISO, said it had scaled back its estimates for output in number 2 producer India by 500,000 tonnes and in Thailand, the world´s second-biggest exporter behind Brazil, by 650,000 tonnes.

The ISO has also cut its output projections for the EU and Brazil, but raised production forecasts for Russia, the United States and Ukraine, adding that it expects lower consumption growth.

The ISO said it expected world consumption growth in 2015/16 to be 1.75 percent, below the 10-year average of 2.01 percent.

It said it expected global consumption of 171.9 million tonnes in 2015/16, compared with 168.9 million in 2014/15."The deceleration in growth is projected on the back of ongoing macroeconomic concerns including a slowdown in emerging market economies and the collapse of oil prices," it said.

Analysts are scaling back sugar output forecasts for India and Thailand because of drought-eroded yields, increasing the likelihood of upward revisions to global deficit forecasts for the 2015/16 season.