FAO/GIEWS - Food Outlook No.5 - November 1999 p. 12

SUGAR

The sharp fall in world sugar prices continued into 1999 reaching a 13-year low of US cents 4.78 at the end of April 1999. Some recovery has occurred since then, mainly supported by large imports by the Russian Federation as traders attempted to stock up before the 45 percent seasonal tariff on imports came into effect on 1 August. The Russian Federation's seasonal tariff is set from 1 August to 30 November. However, prices are likely to remain weak for the remainder of 1999, as worldwide stocks continued to expand.

FAO's preliminary estimate for world sugar production in 1999/2000 indicates a further growth of 2.5 percent to reach 134.3 million tonnes (raw value). Most of the increase would be accounted for by the expansion in Latin America and the Caribbean, the Far East and the EC, with the share of cane sugar remaining at about 72 percent of the global sugar output, slightly above 97 million tonnes. Beet sugar output would have an overall increase of 400 000 tonnes, due mainly to the growth in the EC and the United States. Beet sugar output would have been greater, but has been partially mitigated by lower output in other producing countries, such as Turkey and China.

In Latin America and the Caribbean production in 1999/2000 is estimated to reach 40.1 million tonnes, representing a 3 percent growth from the previous year's harvest. A larger harvested area is expected to expand sugar output in Brazil by about 4 percent to reach 19.9 million tonnes. Improved prospects are also expected in Cuba, where output is estimated at about 3.8 million tonnes, following the adoption of measures aimed at improving efficiency in the industry, but production in Mexico is expected to remain substantially unchanged from last season's level of about 5.1 million tonnes.

Among developing countries in Africa, a decrease of about 6 percent to 4.3 million tonnes is expected, mainly as a result of a weather-induced decline in Mauritius, where output is expected to be less than 400 000 tonnes, down from 680 000 tonnes produced in 1998/99.
Production is also expected to decline in the Near East, to 5.2 million tonnes, mainly due to the introduction of a new policy in Turkey to reduce large stock levels. The new policy rewards growers with higher productivity rather than higher production due to an expansion in areas. Output is currently forecast at 2.2 million tonnes, 600 000 tonnes less than the previous year's harvest.

An increase in production of about 900 000 tonnes, or 2.3 percent, is estimated for the Far East, reflecting a higher output in a number of countries. Production in India would grow by about 5 percent to 17.3 million tonnes, as remunerative cane prices encouraged expansion in cultivated areas. In Thailand and Indonesia good weather and improved cane quality would result in an output of 6.1 million tonnes and 1.9 million tonnes, respectively. However, production in China is estimated to decline from 9.0 million tonnes to 8.4 million tonnes, reflecting financial difficulties faced by the sugar industry and reduced Government support to producers in favour of grain production.

Among developed countries, output is forecast to expand in the EC and the United States due to improved beet yields. Production is estimated at 18.7 million tonnes and 8.1 million tonnes, respectively, representing increases of 5 percent and 7 percent, respectively. Output in the Russian Federation is also expected to increase, by 100 000 tonnes, to reach 1.5 million tonnes, due to a larger harvested area, while lower yields in the Ukraine are foreseen to curb production to 1.9 million tonnes. A recovery from last year's weather reduced crop is expected in Australia, rising by 10 percent to 5.4 million tonnes.

World sugar consumption is forecast to be exceeded by production once more. FAO estimates a growth in world sugar consumption of about 1.9 percent, resulting in a global total of 128.2 million tonnes, which would add to an additional increase in already ample stocks. Growth rates would be higher in developing countries (2.5 percent) than in developed countries (0.7 percent), mainly reflecting population growth in both. Economic growth is an important factor in developing countries but not in developed countries where per caput consumption is considered to be saturated.

As economic recovery occurs in the Far East, an acceleration in consumption growth rates is expected in that region. Countries such as the Republic of Korea and Malaysia, which experienced negative consumption growth in 1998, are expected to have a complete turnaround in 1999/2000, supported by stronger industrial sugar demand. India would consolidate its position as the world's leading sugar consuming country at 17.2 million tonnes, reflecting ample availability and reduced prices. By contrast, consumption in China is likely to remain stable at 8.9 million tonnes, due to an increasing use of alternative sweeteners.

WORLD PRODUCTION AND CONSUMPTION OF SUGAR

In Latin America and the Caribbean, almost 60 percent of sugar consumption, estimated at 23.5 million tonnes, is accounted for by Brazil and Mexico. Consumption in Brazil is forecast to grow slightly to 9.4 million tonnes, while levels in Mexico would remain stable at about 4.4 million tonnes.

Among developed countries, consumption in Europe would remain stable at 19.7 million tonnes, while in the United States an increase in industrial use is likely, accounting for a 1.7 percent rise to 9.2 million tonnes.

An estimation of the world sugar trade in 1999/2000 largely depends on export policy in Brazil. Brazil has the potential to export up to 10 million tonnes of sugar at competitive prices, contributing to almost one-third of world exports. However, following the recent rise in oil prices, larger quantities of cane may be diverted into alcohol production contributing to some relief in pressure on prices. Larger export availabilities are also estimated for the EC, Australia and Thailand. However, import demand would remain substantially unchanged as the Russian Federation, the EC and Japan are expected to remain major importing countries. Under the current supply and demand assessment of the world sugar market, a further rise in world inventories is expected, resulting in a stock-to-consumption ratio of above 40 percent.