Since June 1997 world sugar prices have fluctuated in a narrow range, remaining on average above U.S. cents 11 per lb. The earlier anticipated downward pressure on prices, due to a second consecutive year of surplus in 1996/97 and an increase in stocks, did not materialize. Prices found underlying support in the emerging tighter supply situation of the 1997/98 crop season. Global sugar production is forecast to rise marginally in 1997/98, with a 3.6 percent increase in the developed countries expected to offset a decline in output of 1.5 percent in the developing countries. However, at this level output would fall slightly short of consumption which is forecast to rise further. The shortfall is currently forecast by the FAO at 300 000 tons. A slight drawdown in global stocks is expected, but the growth in supply and demand of the industry will continue to support market stability as no new negative emerging influences for the 1997/98 crop season are now expected. Over the past four months, the International Sugar Agreement composite daily price averaged US cents 11.43 in June, US cents 11.22 in July, US cents 11.70 in August and US cents 11.36 in September.
FAO forecasts world sugar production in 1997/98 at 123 million tons raw value, up slightly from the 122.7 million tons produced in 1996/97. The overall stability in global production is being attributed to a combination of expected production increases in Europe and North and Latin America, that should offset reduced output in major producing countries in the Far East. Sugar production from beets is expected to increase by about 3 percent and contribute 38.2 million tons to global output, while production of sugar from cane would decline by 1 percent to 84.8 million tons.
In Latin America, sugar production is projected to increase by 3.4 percent to 35.3 million tons, mainly due to expectations of a larger harvest and higher cane sugar content in Brazil, where production is estimated to reach 15.3 million tons. Improved yields in Mexico are also expected to result in a 2 percent increase in output to 4.8 million tons. Production in Cuba on the other hand is forecast at 4.2 million tons, slightly lower than the previous season, due to unfavourable weather and continued lack of agricultural inputs.
WORLD PRODUCTION AND CONSUMPTION OF SUGAR
|(. . million tons, raw value . .)|
|of which: EC||(17.9)||(18.2)||(14.3)||(14.3)|
In the Far East, output is forecast to fall by about 7 percent to 33.6 million tons from last seasons 36 million tons due to reduced plantings in some countries and exceptionally dry weather conditions in some others, including Thailand, Indonesia, the Philippines and Malaysia. In Thailand, one of the worst affected countries, estimates for 1997/98 indicate a sugar output of about 5.5 million tons, 14 percent down from the previous season, while an average reduction of 8 percent is expected in the other drought-affected countries. In India, a reduction in the area dedicated to sugar in favour of more remunerative crops, is expected to contribute to 12 percent reduction in output to some 13 million tons. On the contrary, in China, an increase of about 4 percent, to 7 million tons, is expected mainly due to an increase in the area planted to sugar cane in the Southern Provinces.
In South Africa, production prospects have improved in areas where cane fields this year have benefited from adequate rainfall, and production is estimated at 2.5 million tons. In Australia, output is projected to expand slightly to about 5.6 million tons, due to an increase in area. In the EC, favourable weather during the summer significantly improved beet yields, resulting in a 1.5 percent increase in production to 18.2 million tons. In the United States, an upturn in output of about 3 percent to 6.9 million tons is expected, as attractive prices have encouraged expansion in beet areas. Production in the Russian Federation is expected to increase slightly to 1.85 million tons, as higher beet sugar content should compensate for the decrease in harvested area, while production in the Ukraine is expected to further decline to 3 million tons, or 5 percent less than previous year, due to a lack of fuel and agricultural inputs.
World sugar consumption in 1998 is estimated to increase by 2 percent to 123.3 million tons. Aggregate figures for developing and developed countries show a growth rate of about 2.8 and 0.6 percent respectively, with the bulk of the increase accounted for by the Far East and Latin America.
Among the developing countries, population growth and higher per caput incomes continue to boost demand in the Far East, which could reach about 40 million tons, or more than 32 percent of global consumption. In China, demand is expected to reach 8.7 million tons in 1998. Although the per caput use of 6.2 kg/year still remains below the average of other countries in the same region, the expansion of the soft drink industry is a major factor contributing to the rise in demand. Consumption in India is expected to reach 15.7 million tons, or 2.6 percent more than the previous year; indicating a decrease in the growth rate due to lower domestic production.
An anticipated 1.7 percent increase in consumption in Latin America is mainly due to improving economic conditions. For instance, in Brazil, demand is expected to grow by more than 2 percent to 8.9 million tons, as direct and industrial use by food and beverages manufactures are both forecast to increase. Meanwhile, demand in Mexico is expected to remain stable at 4.4 million tons, as the soft drink industry utilizes both corn sweeteners and sugar.
In the developed countries, the outlook is stable, reflecting slow population growth and generally low income elasticities of demand. In addition, competition from non-caloric sweeteners and decreasing sugar dietary intake for health reasons are also reducing demand. For instance, in Japan, where consumption is forecast to decline by about 2 percent to 2.4 million tons, the substitution of alternative sweeteners is a major factor. In North America, consumption is expected to grow by 1 percent to reach 10.2 million tons, while in the CIS it is expected to remain stable at 10.6 million tons, indicating that the steady decline experienced over the last six years may have come to an end.
World gross import demand is estimated to remain relatively unchanged at about 34 million tons, raw value. Imports into Russia are projected at 3.2 million tons, including some 500 000 tons of raw sugar from Cuba. Similarly, no major changes are expected in Chinas imports of an estimated 1 million tons. In India, a return to net importer status is a possibility, as the Government may require imports of between 0.5 million tons to 1 million tons to offset reduced production. In the United States, lower imports are anticipated, as cane refiners will only be allowed to import 1.8 million tons under the annual quota system, down from 2.1 million tons last year, in response to forecasts of higher production.
Export availabilities from Australia are expected to reach 4.5 million tons, about 7 percent higher than 1997, while shipments from Brazil are expected to remain at about 6 million tons. On the contrary, a 20 percent decrease to 3 million tons is forecast in Thailands exports, due to reduced outturn and from Ukraine a smaller export volume is also expected as trade with the Russian Federation may be affected by the 25 percent import levy on refined sugar.
After the previous two years of stock accumulation, the volume of sugar held in storage in 1997/98 is expected to decrease slightly. This drawdown suggests that the prices at which sugar is traded internationally will remain relatively stable within a narrow range reflecting the continued expansion in global supply and demand. The most significant change in stocks is anticipated in India, where an estimated 2 million tons could be drawn upon to compensate for lower sugar production and reduced reliance on imports to satisfy domestic demand. Increased production in the EC would be reflected by a slight stock increase, while decreased production in the Ukraine would result in a slight stock drawdown. This will leave the balance in Europe only slightly higher than the previous year. In North America, Central America, South America and Far East (excluding India) no change in stock levels is expected.