Global sugar deficit likely to shrink

by Dave

The Hindu Business Line

The global sugar deficit in 2008-09 may be smaller than the earlier forecast of 3.90 million tonnes as sliding crude oil prices may encourage many Brazilian mills to produce sugar than diverting the crop for ethanol. Weakening Brazilian real will also increase exporters’ realisation.

According to the International Sugar Organisation (ISO) forecast, the global sugar production may fall by 7.4 mt to 161.6 mt in 2008-09.

Brazil has a sophisticated technology to switch over production between ethanol and sugar according to the demand.

Lower crude oil prices curb demand for alternative fuels such as ethanol, which is made from sugarcane in Brazil. Apart from rise in Brazilian production, the global economic slowdown has impacted the demand leading to sharp drop in prices.

In the international market, sugar prices are on the downtrend since October.
Brazil has stepped up exports to Asian countries after shipping costs dropped to $30 a tonne from $39 in October and $85 in September, said an analyst. Brazil exports about 18-19 mt of sugar a year out of a global total of between 45 mt and 50 mt.

In India, sugar production in 2008-09 is estimated to fall 20 per cent to 21.7 mt against 27.3 mt produced in the same period last year. It is set to slip further by 14 per cent to 18.7 mt in 2009-10 sugar seasons.

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