GENEVA (Reuters) - Sugar prices will only start to recover towards 2020 as a global glut of stocks will continue to weigh, the chief executive of the world’s largest sugar trader Alvean said on Tuesday.
Rising production in India, Thailand and the European Union has led to an oversupply of sugar in the world market and white sugar futures on ICE fell to their weakest level in more than nine years on Tuesday, while raw sugar slipped to a 2-1/2 year low.
Gareth Griffiths, who took the helm as Alvean’s CEO last year, estimated a global sugar surplus of 25 million tonnes for the combined 2017/18 and 2018/19 seasons.
“In the short term, prices should go lower,” Griffiths told Reuters.
“Prices are only likely to start recovering during the 2019-2020 Brazilian crop year or 2020 calendar year. It is not likely to happen before that,” he said on the sidelines of the Platts Kingsman sugar conference in Geneva.
Griffith said there was “a real inefficiency about the market structure”.
“This surplus is a white sugar issue and it is having an effect on the whites premium,” he said.
“The raws players are deferring, rolling their deliveries and pricing as much as they can roll them - but we have not had any cancellations of contracts.”
He estimated European producers would export 3 million to 3.5 million tonnes in the 2017-18 year.
“Given the crops, the acreages and the yield, I think we would see a similar number next year.”
Griffiths said Alvean had been “affected” by the weak market, adding “the last few months have been okay for us despite the situation”.
“These won’t be our best years, but they won’t be our worst years either,” he said.
“There is room for Alvean to improve.”
Alvean, a joint venture formed by U.S. agri group Cargill and Brazilian player Copersucar in 2014, has carried out around 26.5 million tonnes of sugar in physical trades since its formation - most of it in raw sugar and is one of the major players in Brazilian exports.
Editing by Nigel Hunt and Susan Fenton