This season's rise in sugar demand in Brazil should be the highest in more than 10 years, boosted by government social welfare programs, analyst Datagro said. Domestic consumption is forecast to increase 6.9 percent in 2007/08 compared with the previous season, when demand grew 2.1 percent.
The rise will reduce the amount of sugar available for exports, Datagro said. "We've noticed an increase in sugar sales due to a higher consumption of industrialised food. This was mainly because of income redistribution programs like Fome Zero (Zero Hunger) and Bolsa Familia (Family Grant)," Datagro President Plinio Nastari told Reuters.
The food and beverage industry absorbs 66 percent of the sugar sold in the Brazilian market. Domestic sales of industrialised foods are forecast to rise 8.2 percent in 2007/08, according to Datagro.
"Low income households are consuming more industrialised food like biscuits, cakes, soft drinks," Nastari added. The 6.9 percent increase forecast is the highest since the mid-90s, when Plano Real, a government program aimed at stabilising the economy, sparked a surge in the consumption of industrialised food.
Sugar demand grew 19.7 percent in 1994/95, but the average increase in the last 12 years was only 1.9 percent per year. "The rise this year affects Brazil's sugar availability for exports," Nastari said. He said he expects the amount of sugar available for export to total 18.8 million tonnes, below the 19.9 million tonnes exported in 2006/07.
Most of this reduction is due to higher local consumption. Sugar output in 2007/08 is forecast to fall around 320,000 tonnes from last season to 29.7 million tonnes.
Brazil is the world's top sugar exporter. Analysts and producers forecast a lower sugar output this year despite the larger cane crop, as mills are directing more cane to produce ethanol. Also, cane industrial yields are poorer.
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