Sugar Shortage to Persist

Asia is at the heart of the global sugar supply crunch, while Russia and the United States are also likely to face big shortfalls this year, reports Reuters from London.

Meanwhile, Vietnam will import 280,000 tonnes of raw and refined sugar this year, more than double the 110,000 tonnes imported in 2009, to help hold down prices on the domestic market, a state-run newspaper reported on Friday.

Vietnam is a small sugar producer, with output of around 1 million tonnes a year, and industry officials have forecast demand of 1.3 million tonnes in 2010.

”While the downturn in sugar production in Asia is not the only source of additional import demand this year, the swing in Asia, and India in particular, lies at the heart of the global supply shortage,” said Martin Todd, managing director of Oxford-based agribusiness consultancy LMC International.

Todd, who was responding to Reuters’ questions as part of a series of interviews with speakers and delegates before the Feb. 7-9 Kingsman Dubai sugar conference, estimated India’s sugar import requirement at least 7 million tons.

”Working on the assumption that output will be marginally better than last year, at around 15 million tons, and consumption holds up at approximately 23 million tonnes – and we really don’t know if it will at current high prices – then, the country will need to import at least seven million tons,” Todd said.

Sugar futures prices more than doubled last year and have continued their rally in 2010 after disappointing seasons in leading producers Brazil and India. Todd, who will be a keynote speaker in Dubai, said Russia and the United States faced big shortfalls in sugar supply.

”Russia and the US are two important, non-Asian countries with a large import need and where low stocks at the start of the crop year leave them with little choice but to turn to the world to make ends meet,” he said.

He said Russia’s raw sugar import requirement was likely to stand at around 2.3 million tons, and the United States could import close to 2.5 million. Exporters such as Brazil and Thailand were expected to struggle to meet the pressure of demand for their output, Todd said.

”Even if you assume that Brazil will produce five million tons more sugar next season (effectively in 2010), global stocks are so low that they will struggle to meet the world’s requirements in terms of immediate demand consumption, as well as the need to re-stock the global supply chain.”

Global sugar stocks will reach their lowest point in the current cycle during this year, but start to recover later in the year, Todd said.

”However, I think the legacy of low stocks will remain with us for a while yet, because the need to re-stock represents extra demand that will help to mop up the additional supplies that will inevitably become available later this year and next year, in particular,” he said.