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Global Sugar Surplus Expected to Hit 4m Tons, but Asian Demand Grows
Erik de la Cruz | August 15, 2011

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Cebu, Philippines. World sugar surplus is estimated at around 4 million metric tons in the crop year to September 2012, above an earlier projection in excess of 3 million tons, but strong Asian demand could offset any oversupply, the International Sugar Organization said.

While supply-and-demand fundamentals will set the tone for global prices, New York raw sugar futures are expected to trade in a range of 23 to 28 cents a pound over the next eight to 12 months — below a recent peak around 31 cents, said Peter Baron, executive director of the London-based ISO.

“There will be a surplus and there will most likely not be a massive restocking. I think that the supply situation should not be a real problem as long as we have a surplus even if it’s a smaller one than many people expect,” he said late on Sunday.

ABN AMRO/VM Group in June forecast 7.83 million tons in excess global supply for 2011/12 (October/September), while Czarnikow forecast a larger surplus of 10.3 million tons.

“China is an interesting case,” Baron said. “We expect that China, for the first time, will import more sugar this year than its WTO quota of 1.9 million tons. We wouldn’t be surprised if China would import more than it did in 2010/11.”

China is forecast to import about 3 million tons in 2011/12, in line with analysts’ estimates, as it needs to beef up its sugar reserves to strategic levels, Baron said ahead of a sugar conference on the island resort of Cebu. Any excess supply from Thailand and Brazil could be absorbed by China and also by Indonesia, which could import about 2.6 million tons in 2011/12 as domestic output was unable to meet the country’s growing demand, Baron said.

New York front-month raw sugar futures have slid around 12 percent since hitting a five-month high at 31.68 cents in late July, weighed down by fears of a global recession, although worries about lower output in top producer Brazil cushioned the fall.

Reuters