Record Brazil Sugar Crop to Depress Prices, ISO Says

July 15 -- A record sugar crop in Brazil and expanding output in India in the year starting October will likely "put pressure" on prices, according to the executive director of the International Sugar Organization.

Brazil, the largest grower, may produce about 41 million metric tons in the 2010-2011 year compared with 36 million tons in the current season, Peter Baron said in an interview in Bali, Indonesia. India, the second-largest grower, may produce about 26 million tons of raw sugar value and export about 500,000 tons, Baron said on the sidelines of a conference.

Raw sugar prices in New York may extend this year's 37 percent loss as Brazilian output surges and India will likely exceed a government production forecast, returning to the export market for the first time since 2008, Baron said. Prices more than doubled last year as crop damage in the two countries crimped supplies.

"We may start to see price pressure in October, but not a dramatic pressure," he said.

Refined sweetener peaked at $767 a ton in January and raw sugar touched a 29-year high of 30.4 cents a pound the following month, before tumbling on speculation that farmers in Brazil and India would boost output.
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Production in China will probably increase by 20 percent to 15 million tons, Baron said. Still, the country may need to import as much as 2 million tons next season, he said.

Prices of the raw variety may tumble to between 13 cents and 15 cents during October to December as expanding harvests swell supplies and the global market shifts to a surplus, Stefan Uhlenbrock, an analyst at Ratzeburg, Germany-based researcher F.O. Licht, said on July 12.

The ISO narrowed its sugar deficit forecast this year to 8 million tons, from 8.5 million tons earlier, because of an "accumulation of small changes," Baron said. Global production in the year ending September is estimated at 158.9 million tons and consumption at 166.9 million tons, he said.

Raw prices probably will trade from 14 cents to 15 cents in the next six months before dropping as low as 13 cents next year, Willem Klaassens, global head of commodity traders and agribusiness at Standard Chartered Bank, said in Bali today. Expected European Union exports of up to 1.3 million tons next year will also hurt prices, he said.

"Demand is not growing very far, while new crops will come out soon," Klaassens said in an interview today. "India will be an important factor for a production increase in Asia; the monsoon started well in India and it's most likely production will be good."

India may produce 25 million tons next year compared with around 19 million tons this season, Klaassens said. The nation is unlikely to export next year as it has to reserve sugar for strategic stockpiles, he said.

Asia will continue to be a "deficit area" with high demand growth as the region's economies recover, Baron said.

Indonesia, Southeast Asia's largest buyer, is expected to import more than 2 million tons in the year starting October to meet increasing domestic demand, according to the Indonesia Sugar Association.

"Imports may be higher as non-stop rains will probably reduce sugar content in cane," Faruk Bakrie, chairman of the association, said today. The country imported 1.67 million tons of raw sugar and 379,000 tons of refined sugar in the 2009 crop year, he said in an interview.

The Philippines may open bids next week to buy 30,000 tons sugar by the end of August and may import a further 120,000 tons by Sept. 15, the Philippine Sugar Millers Association said.

The country may boost sugar imports as drought has affected crops and millers may delay production to the end of October, Archie Amara, the association's executive director, said today.

Sugar exports from Thailand, the world's second-biggest shipper, may plunge 20 percent next year as delayed rain lowers yields and increasing domestic consumption slashes export availability, the country's Cane and Sugar Industry Policy Bureau said today.

"Exports next year will probably be around 3.7 million to 3.9 million metric tons as drought has damaged crops," said Rangsit Hiangrat, director of the bureau. The nation is forecast to ship 4.6 million tons this year, he said in an interview.

Still, declining Thai output will likely be outweighed by the record harvest in Brazil and expanded crop in India.

The ISO maintained its forecast for the 2010-2011 global sugar surplus at 2.5 million tons, on total output of 172 million to 173 million tons. The forecast "is subject to change but not dramatically," depending on the monsoon in India and rains in Brazil, Baron said. The ISO's official production estimates will be released in August.

"The surplus will not impact the market too negatively as many countries need to fill up stocks," said Baron. Inventory replenishing will probably take place when prices are near 14 to 15 cents, he said.

Ending stockpiles for the year 2009-2010 are estimated to be 52.8 million tons of raw sugar value, compared with 60.7 million tons a year earlier, according to ISO's May report.

"The market is at a relatively healthy stage," Baron said.

source: washingtonpost