FAO/GIEWS - Food Outlook No. 3, June 1998 Page 11

SUGAR

World sugar prices increased to an average of US cents 12.33 per lb (ISA price) in December 1997 fuelled by early forecasts of a tight supply situation in 1997/98. However, since then the International Sugar Agreement daily price has declined by more than 20 percent, averaging US cents 11.55 per lb in January, US cents 10.72 per lb in February, US cents 9.84 per lb in March and US cents 9.77 per lb in April 1998. Current prices are about 15 percent lower than in the same period of 1997. Several factors were responsible for the weakening in prices, the major one being the financial turmoil in Southeast Asia which dampened import demand. Other factors include lower than expected requirements also in other major importing countries such as the Russian Federation, China and India. Considering that sugar from the new crop in the Southern Hemisphere will soon be on the market, a substantial recovery in prices is not likely to take place in the short term.

The revised FAO estimate of world sugar production for 1997/98 is 123.6 million tonnes raw value, representing a marginal increase of about 100 000 tonnes over the previous year's output. At the global level, a decline in output in several major cane producing countries such as Thailand, Cuba and India was offset by improved performance in Brazil, Pakistan and Australia. Similarly for beet sugar, reduced output in the Ukraine and the Russian Federation was more than offset by record production in the European Community (EC) and the United States. The share of cane sugar remained substantially unchanged at about 70 percent of the total, or 85.6 million tonnes, as compared to an output of 38.0 million tonnes sugar from beet.

Production in the Far East is estimated to decline by 3.5 percent to 34.1 million tonnes, with much of the fall occurring in Thailand, where the El Niño phenomenon has been blamed for a prolonged drought and unseasonally late rains. A 20 percent reduction in the country's production to an estimated 4.9 million tonnes is expected. A decline in output for the second consecutive year is also forecast for India, where a reduction in area and larger diversion to non-centrifugal sugar production would limit output to 13.0 million tonnes. By contrast, an expansion in area and higher yields would result in a 35 percent rise in output in Pakistan, to reach 3.7 million tonnes. An expansion in cane areas would also increase sugar production in China to 7.7 million tonnes, 5 percent more than in 1996/97.

WORLD PRODUCTION AND CONSUMPTION OF SUGAR

	Production		Consumption
	1996/97	1997/98	1997	1998
	(. . million tons, raw value . .)
WORLD	123.5	123.6	121.2	123.1
Developing countries	79.5	79.3	76.2	77.8
Latin America	34.7	35.4	21.9	22.5
Africa	4.3	4.4	6.1	6.2
Near East	4.6	5.0	9.1	9.3
Far East	35.4	34.1	39.1	39.7
Oceania	0.5	0.4	0.1	0.1
Developed countries	44.0	44.3	44.9	45.3
Europe	23.1	23.7	19.0	19.2
of which: EC	(18.2)	(19.2)	(14.4)	(14.4)
North America	6.7	7.1	10.0	10.2
CIS	5.4	4.1	10.5	10.5
Oceania	5.7	5.9	1.1	1.1
Others	3.2	3.4	4.3	4.3

SOURCE: FAO

Despite a lower than expected harvest in Cuba, output in Latin America is estimated to grow by 2.2 percent, mainly due to the continued rise in Brazil. Sugar production in Brazil is forecast to increase by 5 percent to 15.5 million tonnes, while that in Cuba would decline to 3.4 million tonnes.

Favourable weather in the EC and the United States substantially improved yields and increased sugar production to 19.2 million tonnes and 7.1 million tonnes, respectively. Increases are also expected for Australia and South Africa, with growth rates of 3.5 and 5 percent, bringing production levels to 5.8 million tonnes and 2.5 millions tonnes, respectively. Lower sugar content and a reduction in area were responsible for severe shortfalls in the Ukraine and the Russian Federation. Output in these countries amounted to 2.2 million tonnes and 1.4 million tonnes, respectively.

World sugar consumption in 1998 is forecast by FAO to increase by 1.6 percent compared to 1997 and reach 123.1 million tonnes raw value. This represents a decline from the average growth rate in recent years of 2.5 percent due mainly to the economic downturn in Asia. Growth in the consumption of sugar in the region is expected to fall below 2 percent from the 4.5 percent averaged over the last five years. The impact would be greatest in net importing countries of Southeast Asia, where growth has been most dynamic over the last decade, while other major consuming countries, such as China and India, are not expected to deviate significantly form recent trends.

Consumption in Latin America is expected to rise by 2.8 percent, mainly due to an acceleration in Brazil, where the combined effect of population and income growth, as well as increased popularity of sugar-containing foods and drinks, would result in an estimated consumption of 9.2 million tonnes, 3.9 percent more than in 1997. The outlook in developed countries appears mixed. A decline in sugar consumption is expected to continue in Japan, due to changing dietary habits. By contrast, demand in North America is forecast to grow by 1.5 percent due to a larger than expected increase in the United States where lower prices would fuel an increase in consumption of processed sugar products.

World sugar trade is expected to decline by nearly 3 percent in 1997/98 with gross import demand amounting to 33.5 million tonnes compared to 34.5 million tonnes in the previous year. Major players on the market would continue to be the Russian Federation and China, with imports of 3.5 million tonnes and 1 million tonnes, respectively. India is also expected to remain a net importer with an estimated demand of 1 million tonnes of which 700 000 tonnes have already been contracted. Favourable harvests in several exporting countries have led to export availabilities of 6 million tonnes from Brazil, 4.5 million tonnes from Australia and 3.5 million tonnes from the EC, compared to 1996/97 exports of 5.8 million tonnes from Brazil, 4 million tonnes from Australia and 3 million tonnes from the EC.

World sugar stocks are expected to remain ample at more than 45 million tonnes or 36 percent of consumption. The most significant changes anticipated are an estimated decline of 1.9 million tonnes in Indian stocks, partly offset by an increase of 1.2 million tonnes in the EC.