Global molasses prices forecast northwards

International prices of molasses, which rose sharply in 2004, are likely to continue showing upward bias in 2005 though they may not rise too high from their current levels.

The trend is attributed by the London-based International Sugar Organisation (ISO) to strong import demand from India and deteriorating supplies from countries like Pakistan and Thailand.

The anticipated upward pressure on the prices in the months to come is also related to continued buying by India.

The prices of cane molasses rose from average ¤5.91 per 100 kg in January 2004 to ¤8.70 by December 2004 "" an increase of 47 per cent.

Continuing the trend, they spurted further to cross ¤10 mark in January 2005, according to a recent market outlook report released by the ISO.

However, too much further increase is being ruled out as in that case molasses will not be able to find place in livestock feed mixtures in Europe where it is used extensively for that purpose.

The European traders (the largest buyers) have already turned reluctant to cover requirements and are purchasing only to meet their day-to-day needs. Cheaper grains compete with molasses in the animal feed sector.

The ISO holds the import demand from India as the key driver of the molasses market at present. The Indian imports of molasses are estimated at around five lakh tonne in 2004. These might rise further to around six lakh tonne in 2005.

This is because the indigenous molasses production is estimated to have fallen by a massive 40 per cent in 2003-04 season to around six million tonne.

For the 2004-05 season, the molasses output is projected at only around 5.8 million tonne. Since molasses is used in the country largely for the production of high value beverage grade ethanol, the import of molasses is likely to continue even at high costs.

The country has already suspended its programme of mixing ethanol with petrol and diesel because of supply crunch and high prices.

On the other hand, export supplies from Pakistan and Thailand together are projected to shrink by one third in 2005. Pakistan is the key origin of molasses imports into the European Union.

Recently, Indian importers have also begun sourcing supplies from this country.

In Thailand, the projections of a smaller cane and molasses output in 2004-05 season are seem to hold true. As a result, the exportable tonnage could drop to around one million tonne in 2005 from 1.4 million tonne in the previous year.