A global sugar shortfall might narrow in the next crop year on hopes of bigger harvests in key producers, but prices are expected to remain at high levels, a senior economist from the International Sugar Organisation (ISO) said.
Lindsay Jolly told Reuters the ISO will also reduce slightly its forecast of a sugar supply deficit of 2.2 million tonnes for 2005/2006 (October-September).
"You might see the deficit shrinking considerably," Jolly told Reuters before the start of a week-long international sugar development forum in Manila, referring to the 2006/2007 forecast. "As always there are bullish and bearish arguments in the market," he later told reporters.
He said the bears in the market believe the deficit will be smaller due to prospects of larger harvests in key producers Brazil, India and Thailand.
Market bulls, however, do not see a reduction in the deficit and reckon high oil prices will mean the diversion of more cane to produce ethanol, an alternative to oil in countries like Brazil, the world's largest sugar exporter.
"The ISO suggests there is potential for the supply deficit to fall in 2006/2007, but the fundamentals remain constructive to sugar prices," Jolly said.