Thailand Expects Flat 2010/11 Sugar Production

Sugar output in Thailand, the world's second-biggest exporter, may be little changed in 2010/11 from the recently finished crop as drought is likely to cut cane production, a senior industry official said on Monday.

The 2010/11 crushing season is expected to start in late November and run through April.

Thailand may produce around 68 million tonnes of cane in the 2010/11 crop, barely changed from the 68.48 million in 2009/10, said Prasert Tapaneeyangkul, secretary-general of the Office of Cane and Sugar Board (OCSB), which oversees the sugar industry.

"Much of the cane that was being grown in key regions such as the north and northeast was severely damaged by the drought, which means the current 2010/11 sugar production could be cut significantly," Prasert told Reuters, meaning it would be lower than the OCSB forecast in late 2009.

At that point, it was looking for record output of 80 million tonnes of cane, or roughly 8 million tonnes of sugar, after a surge in world prices in 2009 encouraged farmers to switch to growing cane.

The new forecast of 68 million tonnes of cane was the best-case scenario, Prasert said.

One negative factor was an abnormal dry spell caused by an El Nino weather phenomenon. Another was a drop in world sugar prices that discouraged farmers from investing in fertiliser to improve yield. Some farmers had even abandoned their crops, he said.

New York raw sugar prices have tumbled more than 50 percent from a 29-year high of 30.40 cents per lb in February to settle at 13.75 cents per lb on Friday.

Prasert said the OCSB would review its 2010/11 cane and sugar forecast again by the third quarter after the rainy season ends.

The OCSB's forecast is in line with traders' projections. They have said the delay to the rainy season caused by El Nino would cut cane production as well as sugar content in the cane.

If the forecast is accurate exports could fall from the 4.7 million tonnes expected to be shipped this year and the record 5.1 million tonnes last year.

Thailand consumes around 2.0-2.2 million tonnes of sugar each year and that will be easily covered by output.

"It means we'll have less sugar left for export, but it won't lead to any surge in domestic prices or a sugar shortage," one trader said.

source: reuters