Global sugar trends, FAO report

By Linda Rano

- Last updated on GMT

Related tags: Sugar

International sugar prices have risen by 30.7 per cent since last
November despite a second consecutive year of surplus supplies in
2007/08, according to the Food Outlook report published by
the Food and Agriculture Organisation (FAO) last week.

In March 2008, prices reached a 20-month high of US 15.21 cents per pound, before falling by the end of the month, said the report. The average price for April of 13.20 cents per pound was 5 per cent lower than the average price in March but about 29 per cent higher than the same month last year. Confectioners have found rising commodity prices difficult to accommodate. Finland-based firm Cloetta Fazer​, one of the largest confectioners in the Baltic region, confirmed in April this year that profits dropped between January to March reflecting rising commodity prices. Market fundamentals The FAO report says that the apparent disconnection between international sugar prices and the market fundamentals illustrates the influence of factors outside the sugar market such as rising energy prices. But the market could tighten given an anticipated drop in production for 2008/09, the report continued. World production up 2007/08 Estimated world sugar production for 2007/08 now stands at 168m tonnes; 2m tonnes above the previous season, according to the FAO report. Production is expected to exceed consumption by up to 9.8m tonnes, contributing to a build up of global inventories. Developing countries will be responsible for the bulk of the growth in output, led by Brazil, which could produce 6.6 per cent more than in 2006/07. But about 56 per cent of Brazil's sugarcane harvest could be processed into ethanol, compared with 50 per cent the year in 2006/07. Europe In Europe sugar output in the EU-27 rose slightly to 17.4m tonnes in 2007/08, following favourable growing conditions which boosted yields. The EU hopes to cut production by 6m tonnes over the four years of its sugar restructuring programme. EU agriculture commissioner Fishcer Boel said earlier this month that 5.65m tonnes out of the 6m target had now been given up. Production in the Russian Federation and Ukraine is also expected to decline, according to the report. Consumption Global sugar consumption in 2007/08 is estimated to reach 158.2m tonnes; 4.2m tonnes more than in 2006/07 reflecting increases in Asia, Latin America and the Caribbean. Rising consumption is being driven partly by rising per capita income and population growth in developing countries. In China, consumption will be boosted by rising per capita income, strong demand from the food and beverage sectors and weaker competition from alternative sweetners. Consumption in the EU-27 is forecast to remain stable since markets are saturated and population growth is limited, said the report. In the US there is expected to be a greater use of sugar in food and beverage processing. Trade World sugar trade is forecast to reach 45.6m tonnes in 2007/08 (Oct/Sept) slightly lower than the 2006/07 trade estimate, reflecting lower imports by some countries including China. There were reduced imports following higher production in the traditional importing countries. Overall, imports by the EU-27 could reach 3.2m tonnes in 2007/08, nearly the same level as in 2006/07 by the EU-25. Export availability is expected to rise slightly in 2007/08 after a strong 16.3 per cent growth in 2006/07. However, Brazil, the world's largest exporter, may cut shipments by 3.2 per cent reflecting tighter competition in world markets since the return of India as a net-sugar exporter.

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