The next two years may open a delightful windfall for giant sugar manufactures in the country as international market price projections reveal the possibilities of steady decline sustained by surplus production through 2020.
The coming years of excess output is expected to drive world sugar inventories for this season by a hefty 14.9 million tonnes to a record 92.71 million tonnes.
By 2019, producers, as well as consumers, including Dangote Sugar, BUA, Golden Sugar, among others will likely reap from inventories growth forecast of 98.66 million tonnes, an all-time high in terms of stocks ratio to consumption, driving global stocks-to-use from 50.8% to 53.2%.
Due to extremely low sugar production capacity locally, Nigeria is the fourth largest importer of the commodity with the bulk of it consumed by manufacturing industries and direct consumption accounting for only a quarter of total. As at 2016 about 1.56 million metric tonnes were imported while the country produced a meagre 7% (70,000MT) of local demand estimated at one million metric tonnes.
The largest sugar refinery in West Africa, Dangote Sugar, imported the highest volume of about 850,929 metric tonnes within the first and second quarter of 2017, followed by BUA, which imported 291,010 metric tonnes and Golden Sugar 281,475 metric tonnes.
The National Sugar Development Council (NSDC) importation data for first quarter of 2017 indicated that 693,436 metric tonnes of the commodity was imported in the first quarter of the year, while 739,978 metric tonnes were imported in the second quarter.
The cost of these imports could be substantially less and possibly impact local prices of refined sugar, according to Australian-based analysis group, Green Pool which lifted its forecast for the 2017 to 2018 figure by 3.72 million tonnes to 14.87 million tonnes and upgraded the 2018 to 2019 surplus by 515,000 tonnes to 5.95 million tonnes.
Underlining ideas of weak sugar values ahead, the group said the price cut may have to do with efforts to reduce surplus production, as consumption is highly unlikely to gulp the slack.
In fact, Green Pool signalled the likelihood of a further world production surplus between 2019 and 2020, saying that “2018-2019 will be year two of a possible three-year surplus cycle in sugar before it can swing back to a deficit situation”.
Apart from the major users of sugar, fast-moving consumer goods companies such as the carbonated soft drinks industry, Coca-Cola, Nigeria Breweries and Guinness, among others will also likely benefit.
The upgrade to the forecast for the 2017-18 surplus reflected in the main upgrade of 3.78 million tonnes to 198.27 million tonnes in the outlook estimate representing an enormous 19.39m-tonne rise year on year.
The group forecast a massive expansion in Indian sugar output to 29.6 million tonnes, in line with the Indian Sugar Mills Association estimate, while Thailand’s production was pegged at a record of 13.1 million tonnes, helped by an expected sugar yield of 109 kilogrammes per tonne of cane which, if realized, would be the best sugar yield records since the late 1980s.
For 2018 to 2019, Indian output was seen rising further still, to 30.6 million tonnes, with over 20 percent of next year’s planting. Although production in the likes of Brazil and Thailand are seen retreating, world sugar output was seen falling back to 192.76 million tonne