Global sugar prices have been hit further by fears that the surplus situation is unlikely to improve and estimates of stocks have been revised up. The US Department of Agriculture expects the 2013-14 sugar season to end with stocks of 43.4million tonnes (mt), 13.6% more than its previous forecast made in May. The main contribution to this revision is an upward revision is the opening stocks for the season. Successive good years of a sugar cane crop are weighing down on prices.

Brazil’s industry association Unica confirmed that the country’s sugarcane crop will increase by 10% but a shift to ethanol has limited its impact on sugar. The country’s South-central region has seen its sugar output increase by 0.7% to 33.1 mt in the sugar season (begins in April) till 1 December. The global sugar surplus will be higher by 8.3% over the forecasted level in September, according to a Bloomberg news report, due to higher than expected output in Brazil and Thailand.

In India, crushing has started late due to the tussle over fixing the procurement price of sugarcane. The Indian Sugar Mills Association (ISMA) has said that domestic mills produced 2.4 mt of sugar till 15 December. This is 50% lower than last year but the two numbers are not comparable due to the late start to crushing. More clarity on the pace of output will become clear in the coming months.

ISMA expects India’s sugar output to be 25 mt in the 2013-14 sugar season—almost flat compared with last year. Still, stocks are ample and selling prices flat while procurement costs have increased. Falling international prices make exports less profitable, making it difficult to reduce the domestic surplus through exports.

The government is putting together a package of measures to give relief to sugar mills. One part of this package is the grant of soft loans of Rs.7,200 crore to sugar mills, and this was approved by the Union cabinet on Thursday. More measures are on the anvil. That may explain why sugar stocks have been rallying recently. If the sum total of benefits from these measures fall short of expectations, sugar shares may come under pressure again.