Fao Agriculture Outlook - Sugar

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OECD-FAO Agricultural Outlook 2011-2020 © OECD/FAO 2011

Chapter 6

Sugar

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6.

SUGAR

Market situation
The world sugar market continues to experience considerable price volatility. The world indicator price for raw sugar witnessed a succession of peaks and downward corrections in 2010 before soaring to a 30-year high of USD 36.08 cts/lb (USD 795.4/t) in February 2011. Market fundamentals driving volatile prices were large global sugar deficits in the previous two seasons and adverse weather in a number of countries that reduced the size of the expected rebound in production to higher prices (Figure 6.1). World sugar stocks, which had already been drawn down, fell to their lowest level in 20 years in 2010-11, supporting higher as well as more volatile market prices. International sugar prices are expected to ease back over the remainder of 2011 and into 2011/12, as production responds around the world to recent high prices and the global balance moves into a larger surplus that allows the start of stock rebuilding.

Projection highlights
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The raw sugar price (Intercontinental Exchange No. 11 spot, fob, Caribbean ports) in nominal terms is projected at nearly USD 408/t (USD 18.5 c/lb.) in 2020-21. This is lower than the historical peak at the start of the Outlook, but prices are expected to remain on a higher plateau and to average higher in real terms (when adjusted for inflation) over the projection period, when compared with the last decade. White sugar prices (Euronet, Liffe, Contract No, 407, London) follow a similar pattern and are projected to reach USD 508/t (USD 23cts/lb.) in 2020-21, with the white sugar premium narrowing with higher export volumes to average above USD 90/t over the coming decade (Figure 6.2). Brazil’s sugar production, as one of the lowest cost sugar producers with considerable capacity to expand sugar cane area on a large scale, along with the projected growth in ethanol production, will be key determinants of global sugar production, which is projected to reach over 209 Mt in 2020-21. Government policies that intervene in sugar markets, and production cycles in some major cane producing countries of Asia, will continue to influence world sugar production and price volatility over the longer term. World sugar consumption is expected to grow at a lower average rate over the longer term in response to higher prices to reach 207 Mt in 2020-21. Stocks should rebuild in the near term, but the stocks-to-use ratio is expected to average lower over the coming decade than in the previous ten years, providing support for higher prices (Figure 6.3).

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OECD-FAO AGRICULTURAL OUTLOOK 2011-2020 © OECD/FAO 2011

6.

SUGAR

Figure 6.1. World sugar balance moves into surplus
World sugar production less consumption
Mt r.s.e. 15

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Source: OECD and FAO Secretariats.

1 2 http://dx.doi.org/10.1787/888932426885

Figure 6.2. World prices to decline but to remain on a higher plateau Evolution of world sugar prices in nominal (left figure) and real terms (right figure) to 20201 Raw sugar USD/t 700 600 500 400 300 200 100 0 1990 White sugar USD/t 700 600 500 400 300 200 100 0 1990 Raw sugar White sugar

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Notes: Raw sugar world price: ICE Inc. No. 11, f.o.b., bulk spot price, October/September. Refined sugar price: White Sugar Futures Contracts, No. 407, Euronext market, Liffe, London, October/September. 1. Real sugar prices are nominal world prices deflated by the US GDP deflator (2005 = 1). Source: OECD and FAO Secretariats.

1 2 http://dx.doi.org/10.1787/888932426904

OECD-FAO AGRICULTURAL OUTLOOK 2011-2020 © OECD/FAO 2011

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Market trends and prospects
Prices
World sugar prices are projected to decline from...
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