Too sweet? 6 million tonne sugar surplus predicted for 2011/12

In its Sugar Quarterly Q1 2012 , Rabobank projects a global sugar surplus of 6 million tonnes for the 2011/12 international crop year. The report also states that if Mitr Phol's offer for Maryborough Sugar Factory is successful, it will mean that 75% of Australia's sugar crushing capacity will be owned by offshore investors, up from just 16% in 2010.

Although the halfway point of the 2011/12 international crop year is approaching, prices remain fairly well supported, largely owing to a perceived shortage of export availability against import demand in the early part of 2012. It is expected that by the second half of 2012, when the Indian and Thai harvests will be over and the new campaign in Brazil's Centre/South will be underway, the 2011/12 global surplus will weigh more heavily on international prices.

While the contributions of the EU, Russia and the Ukraine to the sugar surplus are already 'in the bag', as their respective harvests are over, the output expectations for key countries such as China, India and Thailand will take another month or two to confirm.

Initial projections for Brazil´s forthcoming Centre/South cane crop range from 500 to 560 million tonnes. Rabobank's preliminary projection is 522 million tonnes. If the crop were to come in at the lower end of expectations, sugar and ethanol production would be virtually unchanged from last season. If the crop were to come in at the upper end of expectations, both sugar and ethanol production could increase significantly, with implications for both local ethanol prices and international sugar prices.