Wednesday, June 3, 2009

World Sugar 2009/10 Deficit to Prop up Prices

New York, May 6 - Sugar prices, already near three-year highs, will probably get further support because the 2009/10 global sugar market will remain in deficit, industry officials said Wednesday.

Sergey Gudoshnikov, senior economist at the International Sugar Organization, said at the third annual ISO/Datagro sugar conference here that initial indications show a deficit of 4.9 million tonnes in 2009/10, from a shortfall of 7.8 million tonnes in 2008/09.

"The world deficit will support the price," he said.

Sugar prices have rallied recently to more than 15 cents per lb. in the ICE Futures U.S. raw sugar market, a level last seen in July 2006. Analysts are now predicting the rally will next target 16 cents and beyond.

The deficit will persist despite record Brazilian sugar production in the upcoming 2009/10 season.

"I think in the long run, the world needs more Brazilian sugar," said Gudoshnikov.

Brazil, the world's top producer and exporter of sugar, is seen producing a record 36 million to 38 million tonnes of sugar in the 2009/10 cycle.

That will not be enough.

"Even though Brazil is maximizing sugar production this year, the additional sugar will not be sufficient to satisfy world demand," Datagro analysts President Plinio Nastari said in an interview.

Gudoshnikov said the early indications are that sugar consumption in 2009/10 will rise to around 167.7 million tonnes, from 164.4 million tonnes in the previous season.

World sugar production in 2008/09 was at 156.6 million tonnes but output in India, the world's biggest consumer of sugar, should recover by around 5.5 million tonnes to around 15-22 million tonnes in 2009/10, the ISO official said.

Indian output in 2008/09 had slid to around 14.7 million tonnes, said sugar merchants Czarnikow, from 26.3 million tonnes in 2007/08.