The global sugar market is likely to face one of the worst shortages in history.
The Zhitong Finance app learned that the global sugar market may face one of the worst shortages in history. Years of continuous shortages, major crops affected by weather, and logistics bottlenecks reminded Alvean, the world's largest sugar trader, of 2010 and 2011, when sugar prices reached 30-year highs. Mauro Angelo, CEO of Alvean, which is owned by Brazilian producer Copersucar SA, said: “The current situation is very similar.”
Alvean expects that poor crop prospects in India will lead to a decline in global sugar stocks, and that next quarter there will be a shortage for the sixth year in a row. Worse, logistics bottlenecks in Brazil, the world's largest sugar producer, could lead to insufficient global supply.
Angelo said: “India has always had bad rainfall and very few reservoirs, so next season's harvest is likely to be worse than this year.”
India is not expected to export any sugar during the first season. This is different from the situation in the previous two seasons, when exports reached 11 million tons. Angelo said this means that the market is dependent on Brazil, making sugar prices extremely sensitive to issues such as rainfall, which may disrupt the harvest or delay shipping.
By the time Brazil's infrastructure reached its maximum capacity, sugar was already piled up in Brazilian ports. Big harvests of soybeans and corn have intensified competition for port and rail capacity, while recent heavy rains have increased the time ships wait to load.
Angelo believes that logistics problems may cause Brazil to be unable to ship at least 1 million tons of sugar in October, a loss that will be difficult to make up for in the next few months. This is because congested ports will not be able to carry more goods, and soon new soybean crops will once again crowd out capacity.
As countries that rely on imports to meet demand have few inventories, Angelo sees the risk of supply chain disruptions.
He said, “Consumers are putting off their purchases and have been buying month by month for the past few months. The government is now increasingly involved in procurement and the reduction of import taxes, which is an important sign of tight inventories.” “The whole system is under pressure.”