FAO/GIEWS - Food Outlook No. 5 - Rome, December 2001 p. 13

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Sugar

The strengthening in world sugar prices during the second half of 2000 was reversed in early 2001, largely due to weakening import demand by the Russian Federation, where sugar imports declined more than 1 million metric tonnes due to high domestic stocks and the implementation of new trade policy measures limiting increased sugar imports. By October 2001, the International Sugar Agreement (ISA) daily price averaged US cents 6.79 per lb, compared to US cents 10.75 per lb in October 2000.

However, world sugar prices increased in early November 2001 as news of the significant damage to the 2001/02 sugarcane crop in Cuba resulting from Hurricane Michelle reached world sugar markets. Lower than anticipated production in Cuba due to hurricane damage, as well as potential delays in export shipments to the Russian Federation, provided upward price support with the average ISA daily price increasing to US cents 7.55 per lb by late November 2001.

Global sugar demand in 2001 is currently forecast to reach 130.7 million tonnes, up by about 2 million tonnes from the previous year, and overtaking annual production, now forecast at 129.4 million tonnes, for the first time in seven years. Although early indications point to a recovery in global sugar output in the new (2001/02) crop year, continued growth in consumption in 2002 is expected to lead to a production deficit for the second consecutive year. However, global stock levels are estimated to be sufficiently high to ensure continued market stability throughout 2002.

Global sugar production is forecast to increase by 1.7 million tonnes in the new crop year, to 131.1 million tonnes. Among the major cane producing countries, Australia, Brazil, China and Thailand are all forecast to increase production in 2001/02, with the largest portion of the new crop year's increase attributable to Brazil. Production in developing countries is currently forecast to increase by 3.7 percent in the new crop year, essentially offsetting the currently anticipated 3.5 percent decline in developed country output. Production in Brazil is expected to increase by 2.2 million tonnes, from 17.3 to 19.5 million tonnes, as the sugarcane crop fully recovers from the damage due to drought two years ago. The outlook for increased sugar output in Brazil has resulted in some debate about increasing domestic production and stocks of ethanol in the new season.

World Production and Consumption of Sugar

       
Production
Consumption
2000/
2001
2001/
2002
2001
 
2002
 
(.million tonnes, raw value .)
WORLD
129.4
131.1
130.7
132.7
Developing
Countries
       
87.6
90.8
84.7
86.2
Latin America
       
& Caribbean
37.1
39.6
23.8
24.2
Africa
4.7
4.9
7.0
7.2
Near East
5.8
5.4
10.3
10.5
Far East
39.5
40.5
43.5
44.2
Oceania
0.4
0.4
0.1
0.1
Developed
Countries
       
41.8
40.3
46.1
46.6
Europe
22.2
202
19.8
19.9
of which: EC
(18.2)
(15.9)
(14.6)
(14.7)
North America
7.8
7.6
10.6
10.7
CIS
3.8
4.2
10.1
10.2
Oceania
4.4
4.8
1.2
1.3
Others
3.6
3.6
4.3
4.4

Although the full extent of hurricane damage to 2001/02 cane sugar production crop in Cuba remains unclear, early reports indicate that as much as 35 percent of the new crop was damaged, and an estimated 10 percent completely destroyed. Current estimates for Cuba have been decreased by 500 000 tonnes from last year's estimates, to 3.5 million tonnes. Production declines are also anticipated in the EC, India, the United States and Turkey, with the most pronounced decrease in sugarbeet production areas. Less than anticipated sugar recovery rates in the EC have resulted in an estimated 13 percent decline in 2001/02 production, well below last season's record output.

India may also have less than anticipated sugar production in 2001/02, with current estimates at 18.7 million tonnes or one million tonnes less than last year's record output. However, the decline in Indian output is more than offset by record high domestic stocks, currently approaching 12 million tonnes, as stocks were held off the market in recent years in order to support domestic price levels.

Global sugar disappearance is estimated slightly below 133 million tonnes for 2002, as slower than anticipated economic growth worldwide may preclude growth rates above the average annual 1.5 percent of recent years. Total disappearance in developing countries is currently estimated at 86.2 million tonnes for 2002, an increase of nearly 2 percent over 2001. The largest proportion of growth in world sugar demand is expected to be attributable to the most populous developing countries. Sugar consumption growth in developed countries should continue be close to 1 percent in 2002.

Overall, while world market prices for raw sugar have improved, the growing refined sugar premium has resulted in more Brazilian production being diverted into refined sugar production, away from raw sugar output. World prices for refined sugar have also been supported by lower beet sugar output in the EC and Poland. Nevertheless, current market fundamentals may continue to support raw sugar prices in early 2002, particularly given currently strong raw sugar import demand from Russia and tighter western hemisphere supplies due to less sugar output in Cuba. However, recovery in sugar production in Brazil and continued high levels of world stocks may not support a sustained price recovery throughout the new crop year.


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