Sugar prices expected to ease in 2019 after Brazil effect fades

December 5, 2018
Reicelene Joy N. Ignacio (BusinessWorld Online) |

FITCH SOLUTIONS Macro Research said sugar prices are likely to ease in the coming weeks as the market remains well-supplied while factors that caused prices to rise in October have begun to fade.

It noted that the election of Jair Bolsonaro as president of Brazil in October led to a sudden increase in value of the real, causing sugar prices to rally. However, the Brazilian currency is also expected to depreciate in 2019.

Fitch said that sugar prices will rise to average 12.6 US cents per pound from 12.2 cents per lb in 2018. Global production will meanwhile decline for a second consecutive year, while the global market surplus will fall to 8 million metric tons (MT) in 2019 and 3 million MT in 2020.

However, Fitch said that despite decreased production and consumption growth in 2018 and 2019, large inventories built in 2017 and 2018 will continue to hang over the marker and prices will be kept contained in the absence of bad weather.

Asked for comment, Emiliano Bernardino L. Yulo, a member of the Sugar Regulatory Authority board, said in a mobile message: “Local producers hope that sugar prices albeit predicted to be weak as per Fitch research will be at a level which would afford farmers with a reasonable return.”

Fitch said that Asia will lead the world in sugar consumption growth. India, meanwhile, is expected to overtake Brazil as world’s largest sugar producer, according to the study.

SRA, has said that it seeks to implement a suggested retail price (SRP) on sugar of P50 per kilo, lower than the current P60 to P65 per kilo in the supermarkets.

Agriculture Emmanuel F. Piñol said that it is possible to implement an SRP on sugar, provided that it is not lower than domestic production costs.

“If you think the prices are high, there is that option to import,’ Mr. Piñol said.

“We need to reconcile the SRP with the production cost of our farmers because we cannot set up an SRP that is lower,” Mr. Piñol said.