SUGAR

Following a steady increase from October 1995, in March 1996 world sugar prices declined substantially towards the end of April, reaching a two-year low of U.S. cents 10.50 per lb. during the first week of May as pressure from expected surplus during the 1995/96 crop season materialized. Uncertainties concerning the actual quantity of the surplus which would eventually reach the market have resulted in some recovery in prices. However, the average ISA price during the first four months of 1996 still remains 12 percent below the corresponding period last year.

WORLD PRODUCTION AND CONSUMPTION OF SUGAR

SOURCE: FAO

FAO’s estimate of world production of centrifugal sugar in 1995/96 has been revised upwards by 1.4 percent to 121.4 million tons raw value, mainly reflecting larger harvests expected in several cane producing countries. Production of cane sugar is estimated to increase by 5.5 percent to 85.3 million tons, representing a more than 70 percent share of world sugar production. Most of the increase would be accounted for by Latin America where production is estimated to grow by 2.7 million in 1995/96 tons, 8.8 percent above the previous year’s. Indications are that a substantial increase in production of about 1 million tons over last year’s disappointing outturn of 3.4 million tons may be expected in Cuba, where several sugar producing provinces have already met their output targets. Favourable weather and improved yields should result in a record crop of about 4.5 million tons in Mexico, despite some delays in harvesting. An output of 13.6 million tons is expected in Brazil, due to increased yields and larger quantities of cane diverted from the alcohol to the sugar industry. Therefore, production should easily satisfy internal demand, leaving large exportable quantities. The other major region contributing to this season’s increase is the Far East, where production is estimated at 37.6 million tons, or about 4.5 percent above 1994/95. In India, larger areas under sugarcane and higher support prices would contribute to an expected increase in output by 2.5 percent to 16.3 million tons. In Thailand output is estimated to grow by more than 500 000 tons to reach 6 million tons, as the crop has benefited from good rains and mills have increased their crushing capacity. Favourable weather and incentives to farmers encouraged the cultivation of larger areas in China, where production is estimated at 6.6 million tons. By contrast, typhoons and storms have seriously damaged plantations in the Philippines and output is estimated at only 1.7 million tons, about 300 000 tons below domestic requirements. In Africa, a slight increase of about 200 000 tons is expected, as recent rainfalls in producing countries, such as Mauritius and South Africa, will mainly benefit the 1996/97 crop. In Oceania dry weather conditions had limited effects on Australia’s output, which at 5.1 million tons would be the same as in the previous year. Favourable weather should lead to improved production in the EC and the CIS, despite productivity in the Russian Federation and Ukraine being affected by the lack of appropriate technology. A decrease of about 6.5 percent is forecast for North America, as bad weather and diseases have affected the beet crop in the United States.

World sugar consumption in 1996 is forecast to rise by 2.8 percent over last year’s level, reaching 117.9 million tons raw value. The bulk of the increase is expected in the developing countries, particularly in Asia, where an average increase of about 5 percent is estimated. This trend should continue as several factors indicate that sugar consumption in the Far East has large potential for increase. Significant population growth, low per caput consumption (Far East population currently represents 57 percent of world population, while its share of world sugar consumption is just above 35 percent) and improving economic conditions suggest that demand would continue to rise in coming years. In China, population growth coupled with higher demand from the food industry would result in a 3 percent increase to reach 8.4 million tons in 1996. Similarly, in India the same factors were driving a 5 percent rise in demand, which is estimated at 14.5 million tons. In Latin America sugar consumption is projected to grow by about 2 percent, mainly supported by increased demand in Brazil due to higher per caput income. Consumption has not kept pace with population growth in Africa due to persistent economic difficulties, resulting in a decline in per caput consumption. A more stable outlook is forecast in developed countries, as the combined effect of low population growth, consolidated dietary intake, and competition from alternative sweeteners is keeping the average increase below 1 percent.

Global (gross) import demand in 1995/96 should decrease by 3 percent to an estimated 32 million tons. Imports by China and the Russian Federation are currently estimated at about 2 million tons and 3 million tons, respectively. The reduction in import demand, mainly due to increased production in several importing countries, is forecast to be partially offset by increases in former exporting countries, such as the Philippines and Turkey, and in the United States, where the import quota for raw cane sugar has been recently increased by 200 000 tons. On the supply side, India has already approved exports for up to 950 000 tons for the 1995/96 season, and shipments from Brazil should increase by about 800 000 tons to 5.1 million tons. An increase is also forecast for Cuba , which should bring its total exports in 1995/96 to an estimated 3.5 million tons.

As a result of a second consecutive year of surpluses, world sugar stocks are forecast to increase by about 3.5 million tons, with the stock-to-consumption ratio remaining at around 35 percent. However, the downward pressure on prices has been limited as the supply of high quality white sugar, particularly from the EC, remains tight and a substantial part of the surplus in India might go toward domestic stock rebuilding rather than for export.