Singapore / New Delhi: The world sugar deficit for the year ending 30 September may be “at the low end of estimates” at 1 million tonne (mt), said Christoph Berg, managing director of research company FO Licht.
“That’s taking into account the world economic outlook as a result of the financial crisis and how it affects consumption, particularly of Asian markets,” he said in a phone interview from Bangkok.
“It’s the low end of estimates when others are saying the deficit could be 3-4mt.”
Sugar is the second best performer in the Standard and Poor’s GSCI index of 24 raw materials this year, gaining 8% on speculation demand will exceed supply on lower production in India. Wheat has plunged 37% and nickel 59%. Sugar cane can be turned into ethanol as an alternative fuel.
The sweetener traded at 11.65 cents a pound on Wednesday in New York compared with $51.74 a barrel for crude oil. “If crude oil stays at current levels for the next 12, 18 or even 24 months, ethanol demand will be affected,” he said. “But there are market mandates to fill independent of crude oil prices which means ethanol has to be used.”
Crude oil prices are unlikely to remain low for long because of the measures taken by governments worldwide to stabilize the banking system and stimulate the economy, he said, adding the impact will be felt in the second half of 2009.
Crude oil may recover to $100 a barrel by then or by early 2010, he said. Berg is in Bangkok for a conference.
The ethanol surplus in the US, European Union and Brazil will widen 50% to 1.8 billion litres (476 million gallons) next year as growth in production outpaces demand, Berg said in Paris 4 November.
Meanwhile, in India, the world’s biggest grower after Brazil, sugar output may decline as mills in the main growing regions delayed crushing because of a price dispute and farmers shifted to more profitable crops.
Production in the year ending 30 September, may total 20.5-22mt, the food ministry said in a statement in New Delhi on Wednesday. Output was 26.4mt last year.
Sugar availability may be between 31.5mt and 33mt, lower than 37.4mt last year, the ministry said. The country had sugar stockpile of 11mt on 1 October.
Mills may export 2mt, down from 4.6mt last year, the ministry said. India’s sugar cane production may decline to 294.66mt in the year to 30 June 2009, 13.5% less than last year, after farmers shifted to crops such as grains, according to the farm ministry.
Pratik Parija and Bibhudatta Pradhan contributed to this story.