Record Brazil Sugar Crop, India Harvest Boost to Depress Prices, ISO Says

Sugar output in Brazil and India will expand in the year starting October, which will likely “put pressure” on prices, according to the executive director of the International Sugar Organization.

Brazil, the largest grower, may produce a record crop of about 41 million metric tons in the 2010-2011 year, compared with 36 million tons in the current season, Peter Baron said in an interview in Bali, Indonesia.

India, the second-largest grower, may produce about 26 million tons next year and export about 500,000 tons, Baron said on the sidelines of the 16th Asia International Sugar Conference.

Raw sugar prices in New York may extend this year’s 37 percent loss as output in India will likely exceed a government forecast on an increase in plantation area. The country may return to the export market next year after being a net buyer since 2008, Baron said.

“We may start to see price pressure in October, but not a dramatic pressure,” he said.

Production in China will probably increase by 20 percent to 15 million tons, Baron said. Still, the country may need to import as much as 2 million tons next season, he said.

Raw-sugar prices may tumble to between 13 cents and 15 cents a pound during October to December as expanding harvests from India and Brazil swell supplies and the global market shifts to a surplus, Stefan Uhlenbrock, an analyst at Ratzeburg, Germany-based researcher F.O. Licht, said on July 12.

The ISO narrowed its sugar deficit forecast this year to 8 million tons, from 8.5 million tons projected earlier, because of the “accumulation of small changes,” Baron said. Global production in the year ending September is estimated at 158.9 million tons and total consumption is expected to be 166.9 million tons, he said.

Depleting Stocks

The organization maintained its forecast of the 2010-2011 global sugar surplus at 2.5 million tons, on total output of 172 million to 173 million tons. The forecast “is subject to change but not dramatically,” depending on the monsoon in India and rains in Brazil, Baron said. Official production estimates will be released in August.

Czarnikow Group Ltd., the London-based broker, said June 3 that sugar supplies will outpace demand by 2.5 million tons in the 12 months ending September 2011, while Fortis Bank Nederland and VM Group estimated supply will exceed production by 5.64 million tons in the 2010-2011 season.

“The surplus will not impact the market too negatively as many countries need to fill up stocks,” said Baron. Inventory replenishing will probably take place when prices are near 14 to 15 cents, he said.

Ending stockpiles for the year 2009-2010 are estimated to be 52.8 million tons of raw sugar value, compared with 60.7 million tons a year earlier, according to ISO’s May report.

“The market is at a relatively healthy stage,” Baron said.

To contact the reporter on this story: Supunnabul Suwannakij in Bali at ssuwannakij@bloomberg.net

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