Sugar demand is sweet news for cane growers
Sugar demand is sweet news for cane growers Peter Carruthers

Sugar demand is sweet news for cane growers

THERE is some good news for the state's sugar growers and that is in 2019-20 the world will eat more sugar than farmers can supply.

This year and next the world's population will chomp, suck and chew its way through just under 185 million tonnes of sugar. That's one sweet tooth.

This is good news for a farming sector growing used to seeing supply far exceeding demand.

Tom McNeill, a director at Brisbane-based analysis firm Green Pool Commodities, said the industry had been through a two-year oversupply cycle that was now starting to move back into deficit.

Despite this slightly rosier outlook, recovery will not happen quickly.

Mr McNeill said that despite a slightly more optimistic outlook for this year and next, growers may have to weather another six to 12 months at least of break-even prices.

In the meantime there is an oversupply of sugar sitting in warehouses that still has to be moved onto the world market. India had 10.6 million tonnes sitting in stockpiles at the end of its crop year at September 30, 2018.

By the end of September 2019 these stockpiles will have grown to almost 15 million tonnes.

Mr McNeill said the world production of sugar would reach 188.5 million tonnes in 2018-19 while consumption was expected to reach 184.8 million tonnes.

He said this would likely switch to a deficit in 2019-20 with a world production forecast of 186.6 million tonnes and consumption of 187 million tonnes.

"World consumption will rise by 2.1 million tonnes to a record 187 million tonnes, resulting in a deficit or shortfall of around 1.36 million tonnes at this stage," he said.

India is the emerging giant in world sugar.

It has gone from being a net importer to being a net exporter almost overnight.

"India could export 3.5 million tonnes this year.

"It is expected to make 33.5 million tonnes of sugar in 2019 and consume 25.5 million tonnes," Mr McNeill said.

"It will be left with an eight million tonne surplus."

To put it into perspective, Australia produces 4.5 million tonnes of sugar.

It consumes about 900,000 tonnes and exports 3.6 million tonnes.

The point Mr McNeill makes that when the global sugar price lifts, India can start dipping into its enormous stockpile.

Mr McNeill views the sugar industry as a cyclic beast that is in the doldrums one day and roaring the next.

"Australia is a globally efficient producer," Mr McNeill said.

"The industry has five-year cycles including one to two bad years and one to two good years.

"It will always reflect the global situation, but now I think we are pretty much at the bottom of the cycle.

"We are already starting to see the seeds of recovery."