London, Feb 25 - The global sugar deficit in 2008/09 may be smaller than many analysts believe with output in top producer Brazil set to rise as mills use less cane for ethanol, merchant E.D. and F. Man said in a report on Tuesday.
"Although a deficit is expected this season it is not likely to be as big as many currently forecast," Man said.
The sugar merchant said deficit forecasts had risen on news that the Indian crop was looking as low as 15.5 million tonnes, sharply down from official estimates of 26.3 million tonnes for 2007/08. India is the world's largest sugar consumer.
"The market was staring down the barrel of a very sizeable deficit (in 2008/09), leading to many analysts increasing their deficits to as large as 10 million tonnes," Man said.
"As usual this is not quite a done deal...Brazil is expected to produce considerably more sugar in 2009 leading to a decline in the 08/09 (Oct/Sep) deficit to a much less exciting number," the report added.
Last week Lausanne-based consultancy Kingsman SA raised its estimate for the 2008/09 global sugar deficit to 11.56 million tonnes from 9.66 million previously, citing lower estimates for Indian and Chinese output.
"It could be argued that India is not the real story for 2009, instead attention should be diverted to Brazil as they are clearly going to be the main driver of the sugar surplus/deficit this season," Man said.
"It is our feeling that Brazil is not going to disappoint with a much larger switch to sugar likely given the relative price spread and therefore returns between sugar and ethanol to the mills," the report added.