NEW YORK May 13 Copersucar SA, the world's largest sugar trader, forecast on Tuesday the global sugar market will swing into a deficit next season due to lower Brazil output, joining a chorus of influential market participants who see supplies tightening.
Chief Executive Officer Paulo Roberto de Souza told Reuters he sees a world deficit of 2-3 million tonnes for the season starting on Oct. 1 following a "small" surplus this year and ending four years of oversupply, as the country's struggling millers reduce spending on cane plantings.
It is the sharpest warning from a series of increasingly bullish outlooks on Tuesday as producers, merchants and consumers gathered in New York for sugar week, helping send raw sugar futures to a near two-week high.
Raw sugar futures were higher with ICE July settling up 0.51 cents, or 2.9 percent, at 17.80 cents a lb, supported by a slower than expected start to Brazil's harvest and the forecasts for global deficits in 2014/15.
The news will likely fuel concerns about the impact of a prolonged drought in Brazil, the world's No. 1 producer, which is helping transform the supply-demand outlook for the year ahead. Raw sugar prices have languished near 3-1/2-year lows set earlier this year.
Unica, the sugar and ethanol industry association, cautioned on Tuesday that mills in Brazil, the world's No. 1 exporter, are off to a slow start this season due to the drought and debt problems.
Productivity and yields may worsen, Copersucar's de Souza said.
"When the market is like this, you don't renew the cane as you should," he said.
Older cane is more susceptible to the impact of unfavorable weather, including the increased rains that Brazil could expect if El Nino conditions return later this year.
Data provider Platts Kingsman on Tuesday forecast a supply deficit of 239,000 tonnes of sugar next year, following a 4.3-million-tonne surplus this year.
The International Sugar Organization earlier in the day said the market may be heading toward balance next season after a 4.4-million tonnes surplus in 2013/14, even as global stocks are expected to swell to about 45 percent of world demand in October 2014.
Copersucar maintained an earlier forecast for cane output in Brazil's key center-south growing region in the 2014/15 (April-March) season falling to about 570 million tonnes from 596 million in the previous harvest, but "the risk is to the downside," de Souza said.
A turnaround would be a relief for millers in Brazil and other key sugar producers that have struggled as capacity increases have outstripped world demand growth in recent years, sending prices to close or below breakeven.
The shift to deficit may come as early as this season, said Bruno Lima of INTL FCStone in Brazil at the New York sugar week conferences.
"We could see our first deficit in years ... depending on Brazil's center-south performance," Lima said, though he declined to specify the exact size of the deficit. (Additional reporting by Reese Ewing in Sao Paulo and David Brough in London; Editing by Marguerita Choy)