Sugar demand to exceed supply globally

International prices of sugar are anticipated to remain firm as global consumption is projected to exceed production for the second consecutive year.

The latest estimates compiled by the UN Food and Agriculture Organisation (FAO) has project the world sugar consumption in 2004-05 to be around 144.83 million tonnes, some 8,31,000 tonnes more than the anticipated production of a little under 144 million tonnes.

The shortfall in the annual output is likely to result in decline in sugar stocks, particularly in major sugar importing countries.

This will keep sugar prices in the international market firm but as present prices are already high, scope for further rise appears to be limited.

The International Sugar Agreement (ISA) average daily prices have risen by around 45.5 per cent between January and October, touching 8.45 US cents per pound, a 19-month high.

Sugar prices had been stable at around 6.20 cents per pound between January and May 2004 but rose swiftly in the second half of the season.

However, in the futures market at the New York Board of Trade, May 2005 sugar No. 11 contracts changed hands at around 9.06 cents a pound, indicating firmness in sugar prices ahead.

The May 2005 price is about 47 per cent higher than the May 2003 level.

FAO said global sugar production is likely to be 144 millions in 2004-05, marginally more than production in 2003-04.

This is attributed largely to higher production in Brazil, the world's top sugar producer.

Sugar production in developing countries as a whole is expected to rise to 101.3 million tonne, about 1.9 million tonne more than output in 2003-04, mainly due to to higher Brazilian output.

FAO has projected Indian sugar output to be around 15 million tonne, higher than the estimates released by the domestic sugar industry association.

FAO has estimated Indian sugar production to be higher following excellent late rains in the sugarcane growing areas of Maharashtra and Tamil Nadu, leading to improvement in the cane crop outlook.

Globally, consumption was expected to rise by about 1.6 million tonnes from the 2003-04 level of 143.2 million tonne, said FAO.

Most of the increase in sugar consumption would be driven by demand from developing countries thanks to population and economic growth.

Sugar consumption in China is anticipated to rise in 2004-05 to reach 11.5 million tonne.

However, consumption in India, the world's largest consumer, is expected to fall by 4.7 per cent to 20 million tonne.

Indian consumption was declining because of poor harvests year after year, with sugar imports failing to compensate for the fall in sugar production.

Sugar utilisation in the developed countries is projected to remain relatively stable at 48.5 million tonnes as per capita consumption has already reached the peak of 35 kg in these countries, compared to an average 21 kg per capita in the rest of the world.