World Sugar Prices Set To Rally In 2009

LONDON, Jan 20, 2009 (Dow Jones Commodities News via Comtex) -- Sugar prices are expected to rise in 2009, despite the gloomy macroeconomic outlook, said sugar analyst Czarnikow Tuesday.

Falling sugar production from countries including India, Pakistan and Iran, combined with Europe's transition from an exporter to the world's largest sugar importer, will drive prices higher, said Czarnikow.

"Though the idea of a rally in sugar prices in 2009 seems to be at odds with the global economic slowdown, many of the factors that led to the bull run in sugar prices in early 2006 are once again present today," said the company.
In 2006 sugar prices rallied due to low Indian production, tight Brazil supplies, and the beginning of the European Union's sugar industry reform.
"India has considerable influence on price," said Czarnikow. "This is as a result of the scale of the annual changes in Indian production and India's ability to switch from exporter to importer."

In 2009 India is expected to import between 1 million and 3 million tons of sugar, according to brokers. This is a turnaround from 2008 when the country exported around 5 million tons of sugar.

Brazil, the world's largest sugar producer, is also facing difficulties as the industry struggles to finance production.

"Sugar production is a capital intensive business," said the report. "Across the sector (in Brazil) we estimate that around 20% of mills are facing significant financing problems due the current market environment."