World Sugar News for February 2010

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• EU proposes 500 000 tonnes exports

  In early February, European Union regulators proposed to allow exports of an additional 500,000 tonnes of sugar above the 27-nation bloc quota for this year as temporary measure in response to surging world prices, according to a Bloomberg story. The European Commission, in an emailed statement, said as world sugar prices are well above the market price for EU quota sugar, it will submit draft regulations tomorrow to allow for additional exports in the marketing year ending in July. EU Agriculture Commissioner Mariann Fischer Boel said, “The price situation on the EU and world market as well as production costs for beet and sugar in the EU are such that out-of-quota sugar produced in the EU can be exported without violating the EU’s World Trade Organization (WTO) subsidy commitments.” White sugar trades in the London LIFFE market above the EU reference price of $569 per tonne, the basis for negotiations with importers and the sale of so-called intervention stocks.

• Global production update – All the ‘House’ forecasts

  Dow Jones reported the sugar merchant Czarnikow Sugar said today in a report, “World sugar production in 2009-2010 is expected to fall 13.5 million tonnes raw value of demand, which follows a shortfall of 15.7 million tonnes in 2008-2009. Czarnikow also said, “Stock levels are insufficient to carry the market through a second deficit year.” The firm said “the European Union’s decision last week to export an additional 500,000 tonnes of sugar would do little to ease the tight supply situation.” They also said that given world raw sugar prices are near a 29-year high, and white sugar futures prices are at a record high, these highs prices are “insufficient to uncover additional supply,” causing demand rationing. Reuters reported that “China’s top sugar producing region of Guangxi expects the regions sugar output to fall by about 700,000 tonnes due to drought damage, according to a local government official.

   

  Meanwhile, sugar analyst F.O. Licht has raised their estimate of a global sugar deficit to around 8 million tonnes in the crop year to September 2010 from 6 million tonnes earlier because of a supply crunch. Licht though expects production to rebound in the next crop year, but in the meantime they say prices should stay above 30 cents in February–March before easing from April when the new crop from Brazil enters the market.

   

  Czarnikow raised its forecast of the 2009/10 deficit to 14.8 million tonnes, close to the estimated record deficit of 15.6 million tonnes in 2008/09, revising lower its production estimates in Thailand, Mexico and China. And finally, and probably not unexpectedly, Australia, Brazil and Thailand will meet with WTO (World Trade Organization) officials on Thursday to press their case for the immediate withdrawal of out-of-quota sugar exports by the European Union, saying such exports were illegal under WTO rules – “we are just in a first stage of studying whether we have the right to launch legal action against the EU.”

   

  And finally, the International Sugar Organization increased its forecast for the global deficit in 2009/10 to 9.4 million tonnes, up from a previous estimate of 7.2 million tonnes, citing generally lower crops in the world’s leading producers – with the exception of the EU, Russia, Brazil and probably India.

• Sugar import quota expected in Mexico

  Dow Jones reported that “Mexico’s sugar industry expects the government to issue a sugar import quota between 150,000 and 200,000 tonnes” to help fill a shortfall from its own production due to poor yields. Mexico’s current 2009-2010 sugar harvest is now forecast to produce 4.972 million tonnes of semi-refined standard sugar according to the industry-run National Sugar and Alcohol Chamber.

• Production update – Brazil

  The Sugarcane Industries Association (Unica) released their biweekly report today which said that Brazil’s main center-south 2009-2010 sugarcane crush reached 532.50 million tonnes as of February 15, compared with 529.6 million tonnes as of January31. Unica said that mills crushed 2.9 million tonnes of sugarcane in the first half of February, an increase of 11% compared with 2.6 million tonnes in the last half of January. Total sugar output reached 28.5 million tonnes, 6.7% higher than the 26.7 million tonnes produced a year ago. The region’s ethanol production reached 23.3 billion liters as of February 15, little changed from the 23.1 billion liters produced in the last half of January. Unica said almost 43% of the sugarcane processed through February 15 was used to produce sugar with 57% used for making ethanol.

• India requires imports

  India’s economic advisory panel said that the country needs to urgently import 3 to 5 million tonnes of white sugar as local stocks will run out before the festival season in September. Stating that “the government take the initiative to start the process,” the panel did not clearly say whether it favours a government subsidy on white imports, as local prices are far lower than import cost at the present time.