US May Need to Import More Sugar due to Gustav

New York, The United States may need to import more sugar after hurricane Gustav severely damaged cane fields in Louisiana, brokers said Friday.

In its monthly supply/demand report Friday morning, The U.S. Agriculture Department lowered its estimate of Louisiana sugar production in 2008/09 to 1.3 million short tons from last month's estimate of 1.415 million.

Industry analysts said the decline was most likely caused by Hurricane Gustav, which swept pounding rain through Louisiana's cane areas.

The fall in production caused the key stocks-to-use ratio for the U.S. sugar market to drop to a very tight 4.6 percent from 7.0 percent last month. A ratio of 15 percent is usually considered ideal for price stability.

"There is a need for imports," a dealer for a brokerage house said. "People are talking of anywhere from 500,000 to 1.0 million tonnes."

A broker for a major U.S. financial house said that, while the 4.6 percent is spread through the 2008/09 fiscal year, the shortage may "force the U.S. to get more sugar in."

In early August, USDA announced emergency sugar imports of 300,000 short tons because the stocks-to-use ratio was 5.5 percent.

The imports were ordered after a sugar refinery in Fort Wentworth, Georgia, was destroyed by an explosion and fire on Feb. 7, removing about a month's supply from the sweetener market.

Aside from Louisiana, the tight U.S. sugar situation was underscored by the USDA projection that beet sugar output will fall to 4.0 million short tons in 2008/09, lower than the previous estimate of 4.141 million tons.

Sugar production in Florida, the top cane-producing area of the country, is also seen falling, to 1.747 million short tons compared with 1.759 million tons forecast in USDA's August report.

U.S. sugar ending stocks are seen dropping to 505,000 short tons from 767,000 tons, USDA said.

The U.S. domestic sugar industry criticized the USDA import decision in August. It said the action was premature and that the government should give the market more time to sort out the supply situation before increasing imports which could depress prices.

In the No. 14 U.S. domestic sugar market, the spot November contract declined 0.37 cent to trade at 23 U.S. cents per lb at 11:15 a.m. EDT (1515 GMT), enjoying a premium of around 12 to 13 cents over world No. 11 sugar prices.

sourceLflex-news-food