"Largest-Ever Sugar-Surplus In Recorded History" Plagues The World

Forget the global sugar shortage of the past two years. This season’s glut is forecast to send global stockpiles to record levels as slowing demand and surging production have left a sour taste in sugar bulls mouths.

 

After reaching a high of 15.37 per pound on the third day of January, the price of sugar futures that trade on the Intercontinental Exchange has been on a linear path down, -25 percent to be exact. Sugar has been trapped in a multiyear bear market since El Nino forced a global shortage in 2016 when prices soared to 23.90. Since the high, the price has tumbled more than -65 percent to today’s level of 11.40.

 

According to a report issued by The United Nations’ Food and Agriculture Organisation (FAO), world sugar production is projected to reach its highest ever level, even outpacing global demand, while trade wars are causing more short-term volatility for prices.

Declining sugar production in Australia and Brazil have been conveniently offset by significant increases in China, the European Union, India, and Thailand, the report said, creating the largest global sugar surplus in modern history as production is expected to surpass global consumption “by a large margin.”

FAO forecasters indicate that the excess supply is coming at a time when world sugar consumption is increasing, a long-term trend fueled by demand from emerging countries due to depressed prices.

Although sugar prices have sustained a bear market for several years, rising international crude oil prices could help prices find support as the crop could be used to make ethanol for biofuels instead of an ingredient for food.

Meanwhile, FAO forecasters point to “complex trends” in the oil crops sector, where future prices of oilseeds and oilmeals are rising even though vegetable oil is declining. The report specifies the instability of markets via the trade wars: “In the past few weeks, the evolving trade dispute between the United States and China introduced considerable uncertainty into the market.”

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