The International Sugar Organisation, in its first preliminary forecast for 2009/10, on Friday predicted the global sugar deficit would fall to 4.5-5.0 million tonnes from a 7.8 million tonnes deficit in 2008/09. The London-based ISO also said in its latest quarterly report that it expected a "neatly balanced" global sugar market in 2010/11 as output recovered in India.
A dismal 2008/09 cane crop in India has contributed to the world's sugar deficit. Sugar futures rose briefly following the release of the ISO report. Benchmark ICE July raw sugar futures edged up to 15.52 cents per lb in the late morning from 15.48 cents at the time the report was published.
They were at 15.39 cents, down 0.08 cent, at 1126 GMT. Raw sugar futures have surged by more than 30 per cent so far this year, largely due to the increased demand from India on the international market.
FALLING BRAZILIAN OUTPUT The ISO said increasing output in Asia, including India, and falling output in number one producer and exporter Brazil, would contribute to the smaller deficit forecast for 2009/10. "The ISO expects sugar production during the next crop cycle (2009/10) to increase in India and other Asian producers, as well as in the US and some LDC (least developed country) exporters but to decrease in Brazil," the ISO said.
It said sugar production in Brazil might fall in 2009/10 by about 3 million tonnes. "Assuming a further slowdown of the industry expansion in Brazil in 2010 due to a likely negative effect of the current credit crunch, next season (October/September) all additional cane availability will be needed to cover growing domestic demand for ethanol, leaving less cane for sugar."
Brazilian cane production is allocated to manufacture ethanol biofuel as well as sugar, depending on relative demand and prices. India, the world's top consumer of sugar, has shifted to a net importer from net exporter of the sweetener. "The deficit phase will come to an end if and when India's output rebounds," the organisation said.