LONDON: A strong dollar is raising the prospect of a sixth year of global sugar surpluses in 2015/16, improving prices in local currency terms for producers such as Brazil while making imports costlier. 

The dollar, the currency in which most international trade in the sweetener is conducted, has strengthened against a basket of currencies this year, including against the real currency of top exporter Brazil. 

Brazilian producer selling has picked up markedly in recent months as the real has fallen against the dollar, offsetting the impact of falling sugar prices. "A weaker real does soften the blow to the exporting Brazilian mills," said Michael Liddiard, consultant with Agrilion. 

The global sugar market has been in surplus for five straight seasons and some analysts, including the International Sugar Organization (ISO), commodities house Czarnikow, and Green Pool, have predicted a modest deficit for 2015/16, primarily due to rising consumption, historically seen at around 2 percent a year. 

But analysts said the persistence of the strong dollar could complicate the expected shift from surplus to deficit. 

For emerging economy sugar importers, such as Russia, whose currencies have slid against the greenback, the costs of sugar imports have risen, complicating trading decisions. 
 

"The stronger dollar will not help to re-balance the world sugar market," said Sergey Gudoshnikov, a senior economist with the London-based ISO. 

"The strong dollar will not encourage growth in import demand. It will make the recovery (to a global deficit) more fragile and more difficult." 

Commodities house Sucden said in its latest quarterly report that surpluses had persisted as global sugar output rose. 

"A switch to deficit appears unlikely in 2015," Sucden said. 

"The surplus may be gradually decreasing, from over 13 million tones in 2012 to 6 million tonnes in 2014 and probably 4 million tonnes in 2015, on the back of rising consumption. 

"It is, however, persisting mainly because world production has managed to increase between 2013 and 2014 and to remain stable in 2015." 

A surge in sugar prices in the second half of 2010 and early 2011 led to a sharp increase in production and several seasons in which supplies have outpaced demand. 

The market has since fallen back sharply in dollar terms, from a peak for raw sugar futures of 36.08 cents a lb in February 2011 to a 6-1/2 year low of 11.18 cents on Friday. 

Over the same period, however, the dollar has risen sharply in value against Brazil's real. The current exchange rate of around 3.06 real to the dollar is almost double the level when sugar prices peaked in 2011.