FAO/GIEWS - Food Outlook No.5, November 1998

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The world sugar economy is likely to be beset by surpluses in 1998/99 for the fourth consecutive season. Stock levels are expected to grow further, by 2 million tonnes, to reach 46 million tonnes by the end of the 1998/99 sugar year. This would translate to a stock-to-consumption ratio of 37 percent. Continued production expansion and slower consumption growth in Asia and stagnation in the Russian Federation, due to economic difficulties in these countries, would largely be responsible for the imbalance. These factors would continue to dampen price levels in late 1998 and early 1999.

The 1997/98 season opened with world prices at just under US cents 12 per lb., which declined to US cents 9.84 per lb. by late March 1998, and eventually closed at an eleven-year low of US cents 7.24 per lb. in September 1998. Opening prices for the 1998/99 season (October-September) averaged US cents 7.35 per lb. until 20 October 1998.

World sugar production in 1998/99 is forecast by FAO to grow at the same rate (1.5 percent) as in 1997/98 to reach 127.4 million tonnes (raw value). The volume of sugar produced from sugarcane would increase from 87.0 to 90.2 million tonnes, or 70 percent of the global sugar output for 1998/99. Major production gains would occur in Brazil and India and to a lesser extent, South Africa, which would more than offset the single, largest decline in world sugar production in the EC, which is also the largest beet producer. Globally, the volume of sugar manufactured from beet would decline by 3 percent to 37.2 million tonnes.

In the Far East, production in 1998/99 is expected to increase by almost 9 percent to reach 38 million tonnes, due largely to expansion in India. Output in that country would increase by 16 percent or 1.2 million tonnes to reach 16 million tonnes in 1998/99. Government purchases, for distribution programmes at subsidized prices, have improved the financial position of the mills, and timely payments to farmers encouraged the delivery of expanded cane production to mills. In China, a 3 percent increase in output to 8.7 million tonnes is expected as competitive cane prices would shift production area from grains to sugarcane, mainly in Yunnan and Guangxi provinces. In Thailand, crop rehabilitation programmes would result in some recovery, of about 250 000 tonnes, from the 1997/98 drought-affected level. Sugar output in 1998/99 is expected to reach 4.6 million tonnes.


Production Consumption

1997/98 1998/99 1998 1999

(. . million tonnes, raw value . .)
WORLD 125.4 127.4 123.4 125.2
Developing countries 81.0 84.6 78.4 79.9
Latin America 36.0 36.5 22.5 22.9
Africa 4.4 4.5 6.4 6.6
Near East 5.3 5.4 9.3 9.6
Far East 34.9 37.9 40.2 40.7
Oceania 0.4 0.2 0.1 0.1
Developed countries 44.4 42.8 45.0 45.2
Europe 23.8 22.3 19.6 19.7
of which: EC (19.1) (17.9) (14.4) (14.4)
North America 7.2 7.3 30.0 10.4
CIS 4.1 4.2 9.7 9.7
Oceania 5.9 5.4 1.2 1.2
Others 3.4 3.6 4.3 4.2


Early estimates for Brazil (based also on expectations of an increased share of cane diverted to sugar manufacturing due to high alcohol stocks) indicate that sugar production would increase to about 16.4 million tonnes in 1998/99, 4 percent more than in 1997/98, offsetting a 5 percent reduction in Mexico, the second largest producer in Latin America. Adverse weather is expected to limit production to 5.5 million tonnes in Mexico, while in Cuba, early hopes for a full recovery from the significantly reduced harvest of 3.2 million tonnes in 1997/98 did not materialize as limited resources have constrained much needed structural improvements in the industry. Output levels are expected to remain at 1997/98 levels, and for the region, an increase of 1.5 percent to 36.5 million tonnes is expected.

Favourable weather in South Africa would increase output by 5 percent to 2.7 million tonnes, but in Australia, heavy rains in Queensland are expected to reduce sugar production by 8 percent to 5.4 million tonnes.

Among beet producing countries, sugar output in the EC would be reduced by 1.2 million tonnes, from the 1997/98 record of 19.1 million tonnes, while production in the Russian Federation and Ukraine would remain at about 1.5 million tonnes and 2.2 million tonnes, respectively.

World sugar consumption is forecast by FAO to grow by 1.4 percent to reach 125.2 million tonnes in 1999, in line with revised global GDP estimates which forecast slower economic growth by comparison with pre-1998 rates. In 1998, world sugar consumption grew by 2.0 percent. Developing countries would continue to account for bulk of the consumption, more than 60 percent of the world total. However, at 1.8 percent, the growth rate would be considerably lower than the average of 3.5 percent in 1996 and 1997, before the current economic difficulties began. In Asia, industrial uses would be particularly affected. Consumption growth would remain weak for the region and actually decline in several countries including Malaysia and Indonesia. However, in China and India, consumption is expected to grow in line with population to 9.2 million tonnes and 15.9 million tonnes, respectively, while moderate increases would be recorded in Africa the Near East and Latin America, albeit at lower growth rates than in 1998.

In developed countries, consumption would remain slightly above 45 million tonnes, little changed from 1998, when levels were just under 45 million tonnes. The greatest expansion would occur in the United States, while smaller volume increases would be experienced in the EC, other Western European and East European countries. These increases would offset declines in the Russian Federation and the Ukraine.

The global economic slowdown is expected to weaken import demand, while export availabilities would remain high. In addition, import demand would be further curtailed by increasing self-sufficiency in several major traditional markets. The resultant imbalance is likely to maintain downward pressure on prices in the short run.

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