:. Food Industry News


World Sugar Demand Growth Seen Slowing - F.O. Licht

Source: Reuters
24/03/2009

Sao Paulo, March 24 - World demand for sugar is expected to grow 1.5 percent in 2008/09 (October/September), about half the near 3 percent growth of the previous season, sugar analysts F.O. Licht said on Monday.

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The analysts also said prices should rise later this year.

F.O. Licht Senior Commodities Analyst Stefan Uhlenbrock said at a seminar in Sao Paulo he expected raw sugar prices to rise to 16 cents a pound in 2009 on "quite constructive fundamentals." May raw sugar futures on the ICE exchange in New York <SBK9> were at 13.39 cents a pound in afternoon trade, down slightly.

"We expect sugar prices to rise but the global financial crisis will likely prevent them from rising more," said Uhlenbrock.

He said demand would keep growing but more slowly than previously forecast. He cidted the economic slowdown and slipping production in India and the European Union.

In the short term, prices could fall, under pressure from supplies from Brazil, the largest sugar producer and exporter.

The center-south region, with about 90 per cent of Brazil's cane crop, is starting the harvest with cane availability and sugar production seen higher. Prices could come under pressure if production is higher than expected or if mills use a big share of the crop to produce sugar instead of ethanol.

"The interesting question is how much mills will be able to produce and if cane yields will be lower," he said.

Due to tight credit, mills cut investment in expansion and trimmed fertilizer use, which could lower yields in 2009/10.

Uhlenbrock said sugar production could be "significantly" higher this season. Output in Brazil could rise by up to 4 million tonnes from 34 million tonnes in 2008/09.

F.O. Licht said on Friday that the world sugar deficit would reach 4.4 million tonnes in 2008/09, up from a previous projection of a 2.0 million tonnes deficit.

INDIA

Later in 2009, prices will be defined largely by how much India imports in the 2009/10 (Oct-Sept) season.

"Depending on India's 2009/10 cane crop, they could import 2.5 million tonnes of sugar in that season," Uhlenbrock said on the sidelines of a F.O. Licht seminar in Sao Paulo.

The country is expected to import 1.5 million tonnes in 2008/09, but volume could be bigger if India's government eliminates a 60-percent import tariff on white sugar.

He said Indian demand for 2009/10 is forecast at 24 million tonnes (white value) while production is estimated at 20 million tonnes. Stocks will also determine amounts imported.



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