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Sugar to see shortfalls in 2009
Sep. 17, 2008
Global demand for sugar is forecast to top production for the first time since 2006, the year prices reached a 24-year peak, reports Bloomberg.com. Even with higher stockpiles than in 2006, there should be a shortfall as the word’s largest producer, Brazil, will use an estimated 57% of its sugar cane for ethanol, and the second-biggest producer, India, is to reduce sugar supplies by 16% in 2009 to 23.9 million tons, putting its efforts into more profitable crops such as wheat. Meanwhile, trade rules barring growers from exporting surpluses will reduce European processing by 15%, to 22.5 million tons.
”The fundamentals for next year are better than in the last 12 months and are the best for market values in the last three seasons,'' said Sergey Gudoshnikov, a senior economist for the London-based International Sugar Organization (ISO), which represents countries producing 82% of the world's sugar. ISO estimates stockpiles will reach a record 69.2 million metric tons for 2008, while 2009 stockpiles will fall 5.8% to 65.2 million tons. Although this will be the first decline since 2006, stockpiles will still be 18% higher than that year’s. Inventory declines are partially based on the expected diversion of more sugar to make ethanol instead of sweetener. ISO forecasts global ethanol consumption to increase 34% to about 65.2 billion liters in 2008.
Global consumption is expected to increase 2.3% to 165.5 million metric tons in the next year; with production drop of 4.4% to 161.6 million tons, ISO predicts a shortfall of 3.9 million tons. This shortfall could cause to continue rallying; sugar futures in the US may jump 28% to 18 cents a pound next year from 14.06 cents on Sept. 12, said analyst Jonathan Kingsman in Lausanne, Switzerland, whose firm Kingsman SA advises banks, hedge funds and Fortune 500 companies on commodity purchases. Bloomsberg also quotes Kona Haque, a commodity strategist at Macquarie Bank Ltd. in London, saying the price may reach 20 cents, and Jean Bourlot, a managing director and head of agricultural trading at Morgan Stanley, who said it may double in 18 months.
Source: FCI
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