Global sugar market to return to surplus, says ISO

The world sugar market is to return to surplus in 2010-11, helped by improved output in major producing countries, industry experts have said, as India forecast a return to exports.

The world will produce 2.5m tonnes more sugar than it consumes, the first surplus for three years, the International Sugar Organisation said.

"There are initial indications that, in some key producing countries, production is likely to expand," the organisation said, noting India as the "first obvious candidate".

The increases would more than offset a decline of some 1m tonnes in supplies from the European Union, which enjoyed record beet harvests last year.

Global output fell short of consumption by 8.5m tonnes in 2009-10 and by 12.2m tonnes the year before, the ISO believes.

Production rebound

The comments came shortly after India raised hopes of a return to exports, after two seasons as a net importer.

India's farm minister, Sharad Pawar, forecast that the country's sugar output would reach 24m-25m tonnes in 2010-11 as higher prices encouraged farmers to raise cane plantings after two years of poor crops, dented by a switch to grains and, last year, by a weak monsoon

The revival in production would leave it some 2m tonnes ahead of demand - India consumes about 22m-23m tonnes of sugar a year – and enable the country to return to selling abroad.

"Definitely, India will export next year," Mr Pawar said.

'Risk premium warranted'

His comments are the latest in a series of signs of an easing in India's sugar market, whose tightness helped fuel the surge in sugar prices to multi-decade highs in New York in February.

Prices have since halved, largely thanks to hopes for raised production both in India and Brazil, where output was hit last year by heavy rain which hampered cane harvests and lowered sugar yields.

Nonetheless, despite the upbeat forecasts, prices clung on to positive territory on Thursday.

"There is still a long way to go before these hopes for sugar production are realised. Some risk premium is warranted," a City analyst told Agrimoney.com.

Net importer

Furthermore, the accuracy of the forecasts was "open to question" the analyst added, noting a number of revisions to expectations for 2009-10 and varying assessments for 2010-11 prospects.

Rabobank last week said that some "market participants" were estimating India's crop at 30m tonnes.

A report from US Department of Agriculture staff in New Delhi last month, while pegging production in line with Mr Pawar's estimates, forecast that India would remain a significant net importer in 2010-11 as it rebuilds depleted stocks.

"Despite forecast higher sugar production, relatively tight domestic supplies preclude any significant commercial exports of sugar," the briefing said.

Raw sugar for July stood 0.01 cents higher at 14.68 cents in New York at 16:00 GMT, with white sugar for August up $1.80 at $472.80 a tonne.

source: agrimoney