29|08|2011 - 09h31Global sugar surplus in 2011/12 seen 4m tons
Thailand, the world’s second-largest exporter after Brazil, is forecast to produce around 10 million tons of sugar in 2011/12
World sugar surplus is estimated around 4 million tons in the crop year to September 2012, above an earlier projection in excess of 3 million tons, but strong Asian demand could offset any oversupply, the International Sugar Organization (ISO) said.
While supply and demand fundamentals will set the tone for global prices, New York raw sugar futures are expected to trade in a range of 23 to 28 US cents a pound over the next eight to 12 months — below a recent peak around 31 cents, Peter Baron, executive director of London-based ISO said.
“There will be a surplus and there will most likely not be a massive restocking. I think that the supply situation should not be a real problem as long as we have a surplus even if it’s a smaller one than many people expect,” he said.
ABN AMRO/VM Group in June forecast 7.83 million tons in excess global supply for 2011/12 (October/September), while Czarnikow forecast a larger surplus of 10.3 million tons.
“China is an interesting case,” Baron said.
“We expect that China, for the first time, will import more sugar this year than their WTO quota of 1.9 million tons. We wouldn’t be surprised if China would import more than they did in 2010/11.”
China is forecast to import about 3 million tons in the 2011/12 season, in line with analysts’ estimates, as the world’s second-largest economy needs to beef up its sugar reserves to strategic levels, Baron said ahead of a sugar conference on the island resort of Cebu.
Any excess supply from Thailand and Brazil could be absorbed by China and also Indonesia, which could import about 2.6 million tons in 2011/12 as domestic output was unable to meet the country’s growing demand, Baron said.
New York front-month raw sugar futures have slid around 12 percent since hitting a five-month high at 31.68 US cents in late July, weighed down by fears of a global recession, although worries about lower output in top producer Brazil cushioned the fall.
Commodity trader Energy Brazil said earlier that the country’s main center-south sugar output for 2011/12 is estimated around 30.5 million tons, below the 31.57 million tons projected by cane industry association Unica.
“There was a time when the price of sugar was delinked with the fundamentals. But now we have the impression that the market is more (focused on) the basic fundamentals,” Baron said.
Thailand, the world’s second-largest exporter after Brazil, is forecast to produce around 10 million tons of sugar in 2011/12, topping its 2010/11 output of 9.62 million tons.
“We think Thailand will be able, under the assumption that the weather is normal, to have another bumper crop like this year in the order of 10 million tons,” he said.
“And India will be able to produce a bit more (than this year). We see India very, very strong as a producer next year,” said Baron, adding that India’s output could hit about 26 million tons of whites, or roughly 28 million tons of raws.
India has decided to allow another 500,000 tons of unrestricted sugar exports, a government minister said on Friday, which would come on top of 1 million tons of shipments allowed so far this year.
New York’s October raw sugar contract fell 0.24 cent to end at 27.84 cents per lb on Friday on the Indian news, with the rest of the board up 0.10 to 0.73 cent.
“I wouldn’t be surprised if they can export around 3.5 million to 4.0 million tons under the assumption that their harvest is good, that the monsoon is OK, and that they have another bumper crop,” Baron said.
The Philippines has the potential to become a major exporter if the right policies are in place. The Southeast Asia producer is looking to export as much as 200,000 tons or more of its excess raw sugar to markets, but is struggling to find more buyers given the poor quality of its sweetener.
“The Philippines needs to increase productivity, reduce production costs, and also consider diversification into bioethanol and power generation,” Baron added.
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