World sugar prices may fall more

The world price of raw sugar, among the worst performing commodities this year, may fall further as oversupply will probably persist until 2009, said Peter Baron, executive director of the International Sugar Organisation.

"I have doubts that the price has hit a bottom," he said in an interview at a sugar conference in Bali, Indonesia. "I don't see a real rebalancing before 18 to 24 months from now."

The price of sugar has slumped 20 per cent this year as supply led by India outpaced demand. The sugar market is headed for a production surplus of 10.8 million tonnes in the year to September 2008, with record output of 169.6 million tonnes and consumption of 158.8 million tonnes, the ISO said on August 24.

"Many countries are concerned about what India has been doing," he said late yesterday. Exports by India, the world's biggest producer after Brazil, and its incentives such as freight subsidies will contribute to the surplus, he said. Jayantilal Patel, President of India's National Federation of Cooperative Sugar Factories, said the incentives may not necessarily spur exports as long as prices stay low.

"The price is not favourable now," he said in an interview in Bali. "India is not very keen on exporting." The country will reimburse 4 per cent of the value of raw sugar exported to traders under a "duty-drawback plan", the country's commerce ministry said this month. This is in addition to a freight subsidy of as much as $35 a metric tonnes given to exporters to encourage overseas sales.

"Indian supply is one of the very big reasons" for declining prices, said Sandeep Bhura, director of the New Delhi-based India Trading Co. "It is better to wait another month" before buying sugar, he said in an interview.

The country may export 4.5 million tonnes of raw and white sugar in the crop year starting October, up from around 2.5 million tonnes this year, said Bhura.