Supply and Demand
During the 2006/07 crop cycle, production exceeded consumption by over 10 mln tons. Global cane sugar production shot up to 131 mln tons from 110 mln tons in 2005/06, a jump of 19%. World sugar production totaled 162.6 mln tons, balance contributed by Beet Sugar. Global consumption grew by 5.3 mln tons to 152.4 mln tons. The year on year consumption growth increased to 3.5% from 1.8% in 2005/06. 2006/07 saw a major swing from deficit to surplus, with much of the growth in production coming from the Asian countries, especially India which turned into an exporter in January, 2007 and has thus swung the world sugar balances in the other direction.

Source: Company Research, ISO monthly Sugar Update, Aug 2007

India and Brazil continue to dominate the global sugar production followed by China, Thailand Mexico and Australia. In SY 2006-07 India and Brazil together contributed more than 60 mln MT out the total 131 mln MT of sugar produced from cane. Top ten countries produced more than 80% of the total production.

Source: Company Research, Czarnikow research reports

Currently 69% of the world’s sugar is consumed in the country of origin whilst the balance is traded on world markets. India is the largest consumer of sugar and consumption has grown faster in Asia than across the world. Long-term potential for consumption growth, particularly in Southern African countries, remains positive. Consumption growth in China has increased as a result of the bouyant economic conditions currently being experienced in that country.

2007/08 Estimates
According to the International Sugar Organization (ISO) said that 2007-2008 sugar production would reach 165.6 million tons, up 3 million tons on the year. It also said the 2007-2008 surplus would be around 10.8 million tons. World consumption is projected at 156.8 million tons, up 2.3% from 2006- 2007. The ISO also predicted that India would become the world’s largest sugar producer in 2007-2008, replacing Brazil. They forecast India’s production at a record 33.15 million tons, up 2.55 million tons on the year.

World Sugar Prices
Higher world market prices during the past two years provided the incentive amongst sugar producers worldwide to expand their cane and beet sugar crops. The resultant increased sugar availability has served to dampen world market prices which have fallen from US20 cents/lb in February 2006 to less than 9.5 US cents/lb at the end of July 2007.

Globally sugar is standardized as either raw sugar, which is traded on the NYBOT or Refined Sugar traded on the LIFFE exchange, London. There are a lot of other regional exchanges in Major producing countries like Brazil and India, but liquidity and participation remains dominant in the NYBOT and the LIFFE.

Source: www.ice.com

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