The global sugar surplus has reached frightening proportions and will continue to hold world prices at low levels, the head of the International Sugar Organisation has said.
The main cause of the surplus -- strongly rising Indian production of well over 30 million tonnes forecast for 2007/08 -- had become a matter of great concern to exporters and markets, Peter Baron, executive director of the ISO, said at the Asia International Sugar Conference 2007 on the Indonesian resort island of Bali.
"The (world sugar) surplus looks frightening," Baron said. The ISO recently increased its forecast of world sugar surplus for 2007/08 to 10.8 million tonnes, from 10.3 million tonnes in 2006/07, primarily because of big new production from India.
Baron said he was pessimistic about world market prices, which have already fallen to near 21-month lows of around 9.5 US cents a pound. "Only hopeless optimists can hope," Baron said, when asked for his view on sugar prices.
"I don't know whether they (prices) will go down, but they will not go up," he said. The market was now approaching a point where production costs in the world's leading producer, Brazil, were capping world prices. Baron puts overall production costs in Brazil at between 8 cents and 9 cents a lb.
This ceiling could be lowered by India, which the ISO is now forecasting could produce 33.5 million tonnes of sugar in 2007/08, up from 29 million tonnes in 2006/07. Rising Indian production to this level would mean export availability would swamp global import demand by 5 million tonnes, he said.
"That is clear because some of the big importers, Indonesia, China, Russia, are increasing their own domestic production," Baron said.
China was no longer a real importer, more or less matching its supply with demand. Russia was increasing production and reducing imports, while the Southeast Asian population giant Indonesia was also increasing domestic production to decrease imports, Baron said.
"These are alarming signals for the exporters," he said. Traders would always make money from margins -- "they survive quite easily," he said. But exporters attempting to offset production costs with overseas sales would be the big losers from lower prices, he said.
India would remain a major exporter while it continued to produce such unexpectedly high amounts of sugar. "If they produce those quantities, they have to export," he said. At such high levels of production, half a million tonnes of output by India -- whether more or less production -- was of little importance for the market. "It is the dimension which is concerning," Baron said.
The main cause of the surplus -- strongly rising Indian production of well over 30 million tonnes forecast for 2007/08 -- had become a matter of great concern to exporters and markets, Peter Baron, executive director of the ISO, said at the Asia International Sugar Conference 2007 on the Indonesian resort island of Bali.
"The (world sugar) surplus looks frightening," Baron said. The ISO recently increased its forecast of world sugar surplus for 2007/08 to 10.8 million tonnes, from 10.3 million tonnes in 2006/07, primarily because of big new production from India.
Baron said he was pessimistic about world market prices, which have already fallen to near 21-month lows of around 9.5 US cents a pound. "Only hopeless optimists can hope," Baron said, when asked for his view on sugar prices.
"I don't know whether they (prices) will go down, but they will not go up," he said. The market was now approaching a point where production costs in the world's leading producer, Brazil, were capping world prices. Baron puts overall production costs in Brazil at between 8 cents and 9 cents a lb.
This ceiling could be lowered by India, which the ISO is now forecasting could produce 33.5 million tonnes of sugar in 2007/08, up from 29 million tonnes in 2006/07. Rising Indian production to this level would mean export availability would swamp global import demand by 5 million tonnes, he said.
"That is clear because some of the big importers, Indonesia, China, Russia, are increasing their own domestic production," Baron said.
China was no longer a real importer, more or less matching its supply with demand. Russia was increasing production and reducing imports, while the Southeast Asian population giant Indonesia was also increasing domestic production to decrease imports, Baron said.
"These are alarming signals for the exporters," he said. Traders would always make money from margins -- "they survive quite easily," he said. But exporters attempting to offset production costs with overseas sales would be the big losers from lower prices, he said.
India would remain a major exporter while it continued to produce such unexpectedly high amounts of sugar. "If they produce those quantities, they have to export," he said. At such high levels of production, half a million tonnes of output by India -- whether more or less production -- was of little importance for the market. "It is the dimension which is concerning," Baron said.
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