Sugar demand should grow strongly in emerging economies such as China and oil-rich states in the Middle East and Africa, and the impact of a slowdown in the rich world should be neutral, a senior sugar merchant said.
Alan Wood, managing director of London-based Czarnikow, said he expected global sugar demand to rise by 2-3 percent year on year in 2008, similar to growth rates in previous years.
Czarnikow estimated that global sugar demand grew by 3.2 percent in 2007 and 1.8 percent in 2006. "The downturn is unlikely to impact on demand for sugar - in a general, macroeconomic way," Wood told Reuters in an interview on Monday.
"In the United States and Europe, sugar is such a small item in the (shopping) basket that we are quite insulated." Wood was speaking before the February 3-5 Dubai 2008 sugar conference, organised by consultancy Kingsman SA and al-Khaleej Sugar, which is expected to attract hundreds of senior sugar traders, merchants and analysts from around the world.
The Czarnikow MD said that despite the tough economic outlook, consumption of sugar was set to post double-digit growth in China in 2008 as people's dietary habits change with rising incomes. "You will see the impact in demand for processed foods and soft drinks. We are talking about a young population (in China) with more disposable income," he said.
Wood said sugar demand had exploded in African and Middle Eastern countries, such as Sudan, that have benefited from the boom in oil prices. Rising demand will help eat into a huge global sugar surplus estimated by Czarnikow at just under 10 million tonnes in 2007/08 and projected to fall to a surplus of about one million tonnes in 2008/09 due to a fall in EU output on institutional restructuring and an expected drop in Indian cane planting.
Wood forecast that a greater share of Brazilian sugarcane would be used to manufacture ethanol biofuel in coming years to power a growing fleet of flex fuel vehicles. Czarnikow projects that 54 percent of Brazilian cane will be used for ethanol in 2008/09, up from 52 percent in 2007/08.