Sugar demand to exceed supply says report

By Karen Willmer

- Last updated on GMT

Related tags: Sugar, Supply and demand, Us

Sugar supply for the fiscal year 2008 is expected to be less than
the demand, which could cause continual price pressures, the
United States Department of Agriculture (USDA) said last week.

The USDA's new report said the ending stocks-to-use will be 13.3 per cent, which is below the traditional range for the US sugar market, and there will be a particular shortfall within the domestic organic sugar market. This will therefore mean the sugar market prices will not balance and will remain high, resulting in continued high input costs for the industry. The market for organic sugar will be particularly impacted, as this "is considerably below domestic market needs". ​This follows the USDA's announcement last month that a new approach to sugar is needed in the US in order to ease the pressures on the sugar industry. A report published in July said that US sugar manufacturers are uncompetitive in the domestic and import markets due to the high prices of US sugar. USDA fingered US sugar policy as the main culprit. In particular, the sugar policy has been put under pressure from the high petroleum prices and growing demand for ethanol, causing higher production costs for sugar producers. The Food and Agriculture Organisation (FAO) also announced last month a rising global demand for sugar, which is set to be met by an increase in production. This, it said, will lead to a more stable market and prices. However, last week's report from the USDA claims there are "considerable uncertainties"​ in the sugar market and estimates Sugar deliveries to US food manufacturers peaked in 1999 at 5.63m tonnes and fell to 5m tonnes in 2003, the FAO said last month. Deliveries have resumed their growth, but in 2005 were still 200,000 tonnes below their level in 1999. It noted particularly strong growth in sugar demand has taken place within non-chocolate confectioneries. The USDA report said sugar accounted for only 2.4 per cent of the US crops in 2004, with a value of $1.93bn (€1.4bn). US cane costs of production are twice as high as the world's lowest cost of producers, and is estimated to be higher than the production-weighted world average of all cane-producing countries. However, the US is the fourth largest importer of sugar in the world after the Middle East, Russian Federation and Western Europe, having imported 1.6m tonnes in 2004. The report said sugar imports into the US are likely to increase, particularly due to the trade agreement with Mexico.

Related topics: Commodities, Cocoa & Sugar