Sugar prices will stay above 21 cents a pound in the next two or three years to encourage producers to boost output and meet increased demand, according to the London-based International Sugar Organization.
Global sugar consumption will climb to 201 million metric tons by 2020, driven by demand in the Indian subcontinent and the Far East, Leonardo Bichara, a senior economist at ISO, said in an interview at the organization’s conference in London today. Usage in the current season will be 167.8 million tons, according to ISO estimates.
Raw sugar prices have dropped 27 percent in New York this year on speculation of ample supplies. Global sugar production will exceed demand by 4.5 million tons in the season started last month after two years of shortage, the ISO estimated in its latest monthly report.
“The cost of production is very high,” Bichara said. “Production this year will rise because of favorable weather. Prices need to remain high to stimulate production growth.”
Raw sugar for March delivery advanced 0.8 percent to 23.3 cents a pound on ICE Futures U.S. by 5:23 p.m. in London.
The Indian subcontinent and the Far East will account for 47 percent of the total demand by 2020, he said. Indian use of the sweetener will total 32.7 million tons by 2020, and China will surpass the European Union as the second-largest global consumer by that year, he said, with China using 22.1 million tons by 2020.
The world will need 18.5 million tons of sugar by 2020 from countries other than top producers Brazil and India to meet demand, Bichara said. Brazil’s share of world sugar production will be little changed at 23 percent due to high production costs, he said.
“In the next 10 years, the world will need to count on sugar from other countries even if Brazil and India keep their position as the top producers,” he said.