LONDON Weather-ravaged harvests in Asia look set to trigger further upward revisions to the size of an expected global sugar deficit in the 2015/16 season which is now likely to be the largest in seven years, analysts said on Monday.
Rabobank and F.O. Licht both increased deficit projections on Monday with attention now shifting to analysts Green Pool which will issue figures later this week.
"I am expecting more upward revisions in the deficit (from analysts). Prices are still too low to encourage investment and production," said Michael Liddiard of consultancy Agrilion.
Liddiard said the rising deficit for the 2015/16 season (October/September) was helping to propel prices higher with raw sugar futures on ICE SBc1 climbing to a peak of 15.44 cents a lb on Monday, its highest level this calendar year.
Rabobank on Monday revised its 2015/16 global sugar deficit forecast to 6.8 million tonnes from its previous forecast for a deficit of 4.7 million tonnes.
"The deeper deficit is largely due to a reduction seen in production in India and Thailand," Rabobank senior commodities analyst Tracey Allen told Reuters.
Indian mills have scaled back expectations of sugar output due to drought, notably in Maharashtra, a major growing region.
India is the world's number 2 sugar producer after Brazil, and the top consumer.
"We've seen strong domestic demand for sugar in India, while Indian sugar exports are looking to compete in the world market," Allen said.
Analyst F.O. Licht has raised its 2015/16 global sugar deficit forecast to 7.2 million tonnes, compared with an earlier deficit forecast of 6.5 million tonnes, senior analyst Stefan Uhlenbrock told Reuters on Monday.
The upward revision in the deficit was due largely to frost damage to the crop in Guangxi, the main growing region, in China, Uhlenbrock said.
Emmanuel Jayet, Paris-based analyst with Sucden, said the prospect of a larger crop in Brazil, which begins its harvest later this month, could help reduce the impact of the poor crops in Asia.
"We do see that the news coming from India and Thailand is not good. We do see that the balance sheet of a few countries (in Asia) is tightening," he said.
"Brazil can increase production by 3 million tonnes versus the previous season, and this would compensate for other bad crops. This means we are more dependent on Brazil (for supplies)," he added.
(Editing by Nigel Hunt and David Evans)
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Updated Date: Mar 15, 2016 00:45 AM