White-Sugar Deficit to Persist on Limited Refining Capacity, Kingsman Says

The global refined sugar market will stay in deficit this year, with import demand exceeding available exports by 1 million metric tons, even as raw-sugar production expands, said Kingsman SA, a broker and researcher.

“We expect the whites to remain tight for the next few months,” Jonathan Kingsman, managing director of Kingsman, said in an interview yesterday. The shortage is caused by “limited” refining capacity and the preference of Brazilian millers to produce the raw variety, he said.

The shortfall may help end a 33 percent slump in white- sugar prices this year, even as the overall sugar market swings into oversupply, driven by production increases in Brazil and India, the world’s two biggest growers. Prices of the raw variety have plunged 45 percent this year.

The global market may have a surplus of 2.5 million tons in the year beginning Oct. 1, compared with a deficit of 8.5 million tons this year, the International Sugar Organization said May 14. Excess supply in 2010-2011 may be 6 million tons, Sucres et Denrees SA said April 30.

The “surplus won’t necessarily weigh on world trade” as exporters cap sales to replenish stockpiles, Kingsman said by phone from Lausanne. Inventories declined as prices climbed to a 29-year high of 30.40 cents a pound on Feb. 1.

Production in India may expand to 23 million tons in the year starting Oct. 1, up from 18.5 million tons this year, Kingsman said. That’s below the 24 million ton estimate yesterday from Vivek Saraogi, managing director at Balrampur Chini Mills Ltd., the second-biggest miller.

Output in Brazil

The center-south region in Brazil, the world’s largest producing area, will probably have little changed output next year as no new mills have been built, and it would take three years to construct them, Kingsman said.

“Brazil’s expansion is going to grind to a halt,” so the next time the Indian crop falls short of demand and the country has to import, “we expect prices to rise sharply,” he said.

Raw sugar for July delivery fell 2.9 percent to 14.92 cents a pound in New York yesterday. The slump this year makes it unattractive for millers in Brazil to build plants as it costs 17 cents to 18 cents a pound to produce the raw variety from new mills, Kingsman said.

White or refined sugar for August delivery fell 2.7 percent to $479.40 a ton on the Liffe exchange yesterday.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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