German analyst F.O. Licht on Monday revised up its forecast for 2006/07 (October-September) world sugar production to 167.3 million tonnes against 152.6 million tonnes in 2005/06 and said output may rise even further in 2007/08.
In its previous estimate of the world balance, Licht put (October-September) 2006/07 world production at 161.8 million tonnes. "It is Asia which is behind the phenomenal rise in sugar production with India accounting for roughly 66 percent of the rise this year," Licht said. "India's expansionary drive pits the country against Brazil on the export market and is to a great extent responsible for the softness in global sugar prices," it added.
It said exportable production was likely to break all records to reach 51.3 million tonnes, up 7.7 million on 2005/06 and this would continue to exert downwards pressure on prices, although much of the increase was in India and most of that sugar was unlikely to hit the world market.
It said the quickest solution to the current imbalance between supply and demand would be adverse weather hitting 2007/08 production. And production sooner or later was likely to react to the fall in world prices below the cost of production. "Early indications, however, suggest that world production in October/September 2007/08 could rise by another 4 to 5 million tonnes and that the fall in world prices will not really begin to bite before 2007/08," the analyst added.
It said that barring adverse weather, there would be a further addition to stocks with the current estimate for 2007/08 ranging between 2 and more than 10 million tonnes compared to 12 million tonnes for 2006/07. "Preliminary estimates suggest that the surplus could be nearer to the upper end of the range," Licht said.