WORLD SUGAR MARKET REVIEW

The second revision of the world sugar balance in the 2010/11 (October/September) crop cycle by ISO puts world production at a record 168.045 mlntonnes, raw value, up 4.66% from the last season. Although ISO still expect a record high world sugar production, it has been revised downwards by 0.910 mlntonnes from their previous assessment in November, 2010. In contrast to output, world consumption has been revised marginally upwards and now is put at 167.849 mlntonnes. Consumption is expected to grow at 2.01%, slower than the 10-year average of 2.6%, due to historically high prices in both the world and domestic markets. After two seasons of large deficits, the stocks/consumption ratio had reduced to the lowest level for more than 20 years since 1989/90. The ratio is expected to decrease further to 35.04% in 2010/11 from 35.73% in the previous season of a large deficit. Despite the downward revision of world production, export availability still covers projected import demand. The absence of a physical trade deficit may act to cap prices for the rest of 2010/11 season. The world export availability is put at 50.496 mlntonnes exceeding import demand estimated at 50.309 mlntonnes.

A summary of the third assessment of the world sugar balance in 2010/11 is given in the table below.

World Sugar Balance

2010/11 Production Consumption Surplus / Deficit Import demand Export availability End Stocks Stocks/Consumption ratio in%
168.045 167.849 0.196 50.309 50.496 58.808 35.04

2009/10
160.569 164.549 -3.980 53.393 53.023 58.799 35.73

Change in mln t
7.476 3.300

(mlntonne, raw value)

in %
4.66 2.01

-3.084 -2.527 0.009

-5.78 -4.77 0.02

Source: ISO Quarterly Market Outlook, February 2011

SUGAR ABROAD

AUSTRALIA'S SUGAR CROP FACES CYCLONE THREAT

A massive cyclone threat to the crop in Australia adds further pressure to global prices for the sweetener that are hovering around 30 year highs around 33 cents per lb. Australia typically commands around 11% of the global raw sugar trade with most of its production shipped into growing Asian market such as Indonesia. The Queensland Sugar Ltd expects the country to ship around 2.4 million tonnes of raw sugar in 2010/11, down from the previous season's 3.2 million tonnes. In December, 2010 the QSL said it might have to buy sugar from other countries such as Brazil to honour contracts. Australia harvested 27.4 million tonnes of cane in 2010/11, well below expectations of at least a 33 million tonnes crop as rain disrupted harvesting.

BRAZIL 10/11 SUGAR OUTPUT SEEN SLIGHTLY UP

Brazil's sugar output in the 2010/11 season was revised slightly upward after exceptionally dry weather in 2010 raised sugar concentration in cane. Sugar production was estimated at 38.7 million tonnes, up from the 38.15 million tonnes forecast in September. Because of the dryness, cane crushing in Brazil was projected at 625 million tonnes, still a record high but down from the 651.5 million tonnes forecast in September, according to Conab's third and final estimate for the season. Brazil's 2010/11 average yields were estimated at 77.8 tonnes per hectare, down 4.6% from the 2009/10 season. Sugar content in cane stood at an average of 140.9 kg per tonne. Ethanol production was estimated at 27.7 billion liters, down from 28.4 billion liters in September's forecast. Mills directed more cane to sugar production rather than to ethanol production due to higher returns. Brazilian sugar exports in 2010/11 were estimated at 28 million tonnes, up 14.6% from the previous season.

CHINA SUGAR PRODUCTION MAY FALL

Sugar output in China may decline by as much as 300,000 tonnes after snow and frost this year damaged crops. China's output is expected to be 11 million to 11.5 million tonnes, down from the initial forecast, said ParinAmatyakul, vice president of MitrPhol Sugar Corp. The China Sugar Association on Nov. 10 estimated Guangxi output in the crushing season that began in Nov. 1 to be 7.6 million tonnes, about 63% of China's

total of 12 million tonnes.

EU EYES SUGAR SALES, IMPORTS TO CURB SHORTAGE

EU would approve extra sugar imports and the sale of out-of-quota sugar on the EU market to address an expected supply shortage and to curb rising prices. The European Commission said it would open an autonomous import quota for sugar from any non-EU country, but there were no details on the total volume of the quota or any tariffs that may apply. The Commission's plans to approve the sale of EU out-of-quota sugar on the domestic market appeared to confirm the reversal of its decision to export 350,000 tonnes, which it announced in November but subsequently delayed. Out-of-quota sugar refers to excess sugar produced above EU national quotas, which is often sold on world markets as, unlike quota sugar, it does not benefit from a guaranteed EU minimum sale price.

INDONESIA PERMITS TO IMPORT 2.43 MLN T RAW SUGAR

Indonesia has issued permits to import 2.43 million tonnes of raw sugar for 2011, an increase of 5% from 2010. The raw sugar, which could come from Thailand, India and Australia, will be processed into refined sugar and sold to Indonesia's food and beverage industry.

JAPAN RAISES 2010/11 SUGAR IMPORT ESTIMATE

Japan has revised up its sugar import estimate for the year to September 2011 from three months ago as local sugar beet output fell more than expected. Japan now estimates sugar imports for the current sugar year at 1.372 million tonnes on a refined basis, up 10.3% from a year earlier. In September, sugar imports in 2010/2011 were estimated at 1.265 million tonnes. If annual imports were at 1.372 million tonnes, that would be the highest level since 2007/2008. Major foreign sugar suppliers to Japan are Thailand, Australia and South Africa.

RUSSIA MAY CUT RAW SUGAR IMPORT TARIFF FROM MARCH

The customs union of Russia, Kazakhstan and Belarus may cut import tariffs for raw cane sugar to $50 per tonne from March following a drop in domestic beet sugar production due to a drought. Currently, the tariff is $140 per tonne, unchanged from October 2010. Brazil, Cuba and Thailand are the main raw sugar suppliers. Russia, the world's third-largest sugar buyer, imported 1.94 million tonnes of raw sugar in JanuaryOctober last year, up 59.7% year-on-year.

THAILAND SUGAR ESTIMATE SEEN RISING BY 100,000 TONNES

The Cane & Sugar Board may revise its output forecast for the crop year ending Sept. 30 to around 7 million tonnes from an earlier estimate of 6.9 million tonnes. Cool weather is aiding harvesting and the crop quality also looks good. Area under cane plantation also increased to 1.1 million hectares this year from about 1 million hectares in 2009/10. Sugarcane yields are as high as 110 kilograms a tonne, up 10%. Sugar crushing in Thailand, the largest exporter after Brazil, began in end-November and will likely continue until May.