|No. 4||Rome, December 2004|
World sugar production forecast to increase in 2004/05
Preliminary FAO’s forecast indicate that in 2005 world sugar consumption would slightly surpass global production for the second consecutive year. At a forecast level of 144.8 million tonnes world sugar consumption will exceed production by 831 000 tonnes. The anticipated shortfall in global output would lead to falling stocks in major importing countries, and prices are expected to remain at current levels . The International Sugar Agreement (ISA) average daily price recovered by more than 45.5 percent between January and October 2004 when prices averaged US 8.45 cents per pound, a 19 month high (see Appendix Table 12).
World sugar production is forecast to reach 144 million tonnes in 2004/05, a 2 percent increase over the 2003/04 level, mainly as a result of a larger harvest in Brazil and some output recovery in India. Sugar output in developing countries, is expected to reach 101.3 million tonnes, 1.9 million tonnes more than in 2003/04, mainly reflecting continued growth in Brazil.
Production in Latin America and the Caribbean is forecast at 47.8 million tonnes, an increase of 1.7 percent. Preliminary estimates for Brazil set production at 27.5 million tonnes, an increase of 1.3 percent, mainly due to favourable weather conditions and better utilisation of processing capacity. Cane output in both the Centre/South and the North-North East regions are likely to expand. Prevailing high alcohol and sugar prices have led to rising investment in the industry through mergers, joint ventures and direct acquisitions. An estimated 40 mills are expected to be operational by 2007, thus strengthening Brazil supply response capabilities.
World Production and Consumption of Sugar
In Mexico output is expected to reach 5.5 million tonnes, an increase of 2.4 percent due to an expansion in area in anticipation of further increases in quota under NAFTA. However, the current dispute on sweeteners with the United States has stalled any additional expansion in plantings. In the Caribbean, Hurricane Ivan adversely affected cane production in several countries. In Jamaica, sugar output declined by 15 percent.
Sugar production in the Far East is forecast at 42 million tonnes, a marginal increase of 1 percent from last year. Output in India is forecast to rise to 15 million tonnes, a recovery of some 1.8 million tonnes from the exceptionally low level reached in 2003/04, as adequate rain in the sugar growing areas of Maharashta and Tamil Nadu improved crop prospects. Imports requirements for the 2004/05 season are most likely to be smaller than anticipated given that an estimated 8.5 million tonnes could be released from stocks to offset production shortfalls but the government has not made any official announcement on the level of imports required for the new season. However, it has raised the statutory minimum price from 730 rupees to 745 rupees a tonne for the 2004/05 season.
Sugar production in China is expected to decline for the second consecutive year. Following severe drought in the Guangxi region, which accounted for more than 55 percent of total sugar production in 2003/04, the 2004/05 output is forecast to decrease by 5.3 percent. Sugar output in Thailand is forecast to fall by 4 percent to reach 7.3 million tonnes in 2004/05, due to continued government policy of restricting output to address domestic oversupply at supported prices. Cane production has been set at 65 million tonnes annually , along with a guaranteed price of 580 bahts per tonne. Production quotas will apply through to 2007/08, with no immediate plan to revise the arrangement in light of higher global sugar prices in late 2004.
Sugar production in Africa (developing and developed countries) is forecast to increase by 5.8 percent to reach 7.9 million tonnes in 2004/05, mainly reflecting the growth in South Africa, where output is expected to increase to 2.6 million tonnes due to an expansion in irrigated areas. Output in Egypt is expected to remain steady at 1.4 million tonnes, while both Mauritius and Kenya are forecast to raise production by 4 percent and 7.6 percent, respectively.
Sugar output in developed countries is forecast to reach 42.6 million tonnes in 2004/05, an increase of 2.4 percent from the previous season. This growth is mainly attributed to the 5.7 percent increase in output expected in the EU as a result of favourable growing conditions. France is expected to produce 4.6 million tonnes, slightly above the 2003/04 level, despite a 4 percent drop in planted areas, while production in Germany is forecast to increase 3 percent to 4.2 million tonnes. In Australia, despite adverse weather conditions in some part of the country, production is anticipated to increase by 153 000 tonnes or some 3 percent from the previous drought affected season. However, at this level it will remain 12 percent below the record output of 6 million tonnes achieved in 1995/1996. Sugar production in the United States is forecast to reach 8.2 million tonnes in 2004/05, virtually unchanged from 2003/04, despite several hurricanes and tropical storms during the season that hit the states of Florida, and Louisiana.
Global sugar consumption is estimated by FAO to increase by 1.6 million tonnes in 2004/05, from the level of 143.2 million in 2003/04. Developing countries would account for most of the increase in consumption underpinned by population and GDP growth.
Consumption in China is expected to reach 11.5 million tonnes in 2004/05, about 490 000 tonnes more than the quantities consumed in 2004/05. Demand is essentially driven by rising per capita income and the substitution effect brought about by the closure of saccharin processing plants. Reflecting strong higher per capita disposable income, sugar is largely consumed by food processing, beverage, and pharmaceutical industries, with only a small share being diverted to household consumption, as per caput consumption remains below 10 kg, two folds lower than the world average of 21 kg. Although India is expected to remain the world’s largest sugar consuming country, sugar consumption in 2004/05 is forecast to be lower by 4.7 percent, at 20 million tonnes, due mainly to the anticipated lower production only partially compensated by imports. However, a higher consumption of traditional sweeteners such as guru, and khan sari is anticipated. Sugar consumption in Africa is forecast to grow by 1.4 percent in 2004/05, in line with long-term average growth rates based on population and income.
Consumption in developed countries is expected to remain relatively stable at 48.5 million tonnes, as per capita consumption is already high at 35 Kg, compared to 21 Kg for the rest of the world. Consumption in Europe and North America is forecast to remain at 20.3 and 10.8 million tonnes, respectively, while in the CIS, consumption is expected to reach 11.7 million tonnes.
Monthly ISA prices - that averaged US 6.20 cents per pound from January to May 2004 - strengthening in the second half of the year to US 7.7 cents per pound in the period June to October. However, at this level the average price was still 4.2 percent lower than in the corresponding period in 2003. The preliminary market forecast for 2004/05 indicates a continued shortfall in supplies, underpinning the continued firmness of market prices. At the New York Board of Trade, the May 2005 Sugar No.11 futures contract averaged US 9.06 cents per pound in October 2004, about 47 percent higher than the corresponding period in 2003. However, as world sugar stocks remain ample, prices should remain around current levels.