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Supply Chain

Sugar Shortage Seen by Licht

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Sugar Shortage Seen by Licht

Global sugar production may trail demand for a second consecutive year as the lowest prices since 2010 spur consumers to buy more, according to F.O. Licht GmbH.

Demand is set to climb two per cent in the 12 months starting October this year while output won’t increase in Brazil, the world’s biggest supplier, and is likely to shrink in the European Union, said Stefan Uhlenbrock, senior analyst at the Ratzeburg, Germany-based researcher.

A shortage may result after a 1.1 million metric ton deficit this season, he said.

“There is a likelihood that the deficit will persist because Brazil will probably not produce more sugar next season and the EU will probably produce much less,” Uhlenbrock said by phone on Tuesday before the company’s conference in Bangkok. F.O. Licht is raising its estimate of a shortage this year from 600,000 tons because of lower Chinese production, he said.

Raw sugar futures fell to 14.07 cents a pound on 5 January, the lowest since June 2010, on expanding global stockpiles. Inventories were 43.6 million tons at the end of 2013-2014, the largest since at least 1960, according to the US Department of Agriculture.

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“There might be a moderate price increase but statistically speaking there is still more than enough sugar around to satisfy all needs,” Christoph Berg, managing director of F.O. Licht, said in an interview. “Consumption is strong and healthy.”

Shortages are already forecast by Green Pool Commodity Specialists Pty and Kingsman SA for 2015-2016. Green Pool has estimated the deficit at 5.02 million tons and Kingsman has forecast a shortfall of 5.2 million tons.

Production in the European Union may drop as farmers reduce planting, Uhlenbrock said. China will probably produce 10.6 million tons this crop year, less than a previous estimate of 12 million tons and below 13.3 million tons a year earlier, he said. Brazil’s production in 2014-2015 is seen at 35.5 million tons while India may harvest 26 million tons, he said.

Bloomberg News, edited by ESM

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