TOWNSVILLE, Australia—Sugar is one of the few bright lights on the global commodity stage at the moment as demand outstrips supply for the first time in five years.
Globally, the crop is forecast to fall into deficit, down by 5.2 million tonnes of sugar on last season to 177.5 million tonnes a deficit of 4.1 million tonnes.
It is expected to deliver more sustainable returns to growers, but possible price hikes for consumers.
Analysts are predicting a deficit over the next two seasons which will boost values, just months after the raw sugar price fell to about 10 cents a pound for the first time in almost a decade, a value below the cost of production.
Tom McNeill from Green Pool Commodities said weather conditions and poor investment in major growing regions were bringing down the global crop.
"We had five years of surplus conditions and that was largely [because of] better supply out of India," he said.
"It's really taken El Nino and poor financial conditions in both India and Brazil to bring production down globally... we saw far too much rain in Centre South Brazil and that slowed the harvest and also reduced the sugar content."
He explained the Brazilian government had held down the gas price and therefore the ethanol price, which had lowered producers' returns.
Now, the global deficit was expected to push sugar prices to sustainable levels for farmers and millers.
McNeill said the futures price had lifted to 15.5 cents per pound recently, and values for 2016 reached $450 a tonne, and he said the overall story for the 2016/17 season was much more sustainable.
Source: www.abc.net.au