Sugar production seen remaining weak

Sugar production seen remaining weak

A sugar cane farmer works on a burnt field, a practice which authorities banned to avoid smog, in Suphan Buri province, north of Bangkok, Jan 21, 2020. (Reuters file photo)
A sugar cane farmer works on a burnt field, a practice which authorities banned to avoid smog, in Suphan Buri province, north of Bangkok, Jan 21, 2020. (Reuters file photo)

DUBAI: A sharp fall in production in Thailand has propelled sugar prices to the highest level in more than two years and early indications for next year suggest another poor crop is likely, participants at a sugar conference in Dubai said.

Drought and low cane prices have contributed to a decline in the kingdom’s production, the world's second largest exporter after Brazil.

"The (sugar) market is recalibrating but can't do this properly until it knows how much sugar Thailand will actually produce this year and what the implications are for next year," Martin Todd, managing director of LMC International said.

Thai sugar mills usually crush cane until early May, but this year they could stop crushing in early March due to limited supplies of cane, Rangsit Hiangrat, director general at Thai Sugar Millers Corp., said in late January.

Analyst Green Pool, in a report received on Monday, cut its forecast for Thai sugar production this year to 9.55 million tonnes, sharply down from last season’s 14.57 million tonnes.

Global sugar prices have risen sharply so far this year, climbing to a more than two-year peak of 15.13 cents a lb last week, as the decline in Thai production further tightens a market which was already widely seen in deficit in the 2019/20 season.

Todd said LMC was forecasting a global sugar deficit of 7 to 8 million tonnes this year. A Reuters poll of traders and analysts, issued in late January, had a median forecast of 6.72 million tonnes.

Participants said Thai farmers may also be shifting to other crops because of a drop in cane prices to the lowest level in around a decade.

"Everyone is afraid of calling the acreage on Thailand much lower, but at the price of cane which was paid last year the farmers were complaining a lot and saying at this price we will divert to other crops, and we are seeing that happening," said Enrico Biancheri, global head of sugar at Louis Dreyfus.

"I think the market didn't take it too seriously just because in the previous two or three years, the opposite was happening, we were having more acreage than expected."

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