Large sugar stocks in China and India should keep world prices weak near term, but surpluses should eventually ebb, mildly lifting prices in the next crop year, the International Sugar Organisation said on Thursday.
"The sugar price will probably not move far away from where they are now until the end of this crop year," Peter Baron, executive director of the ISO, told an Asian sugar conference in the Malaysian capital.
"So, by the end of this crop year, we will have a similar price as of now," he said. "There might be a recovery of prices in a coming season (2004/05) because we will have a deficit," he said.
London white sugar futures for August delivery, closed down $1.90 at $215.60 a tonne on Wednesday and compared with a 2004 high of $235.20 on April 28. Baron did not give a forecast for prices.
The world sugar season runs from October to September. The ISO is an intergovernmental body devoted to improving conditions on the world sugar market through debates, studies and statistics. It predicted in March there could be a surplus of 614,000 tonnes of raw sugar for 2003/04, versus a 6.93 million tonne surplus in 2002/03. But in its latest figures, it projected global output of 145.7 million tonnes would nearly match 145.6 million tonnes of expected consumption.
For 2004/05, demand may exceed production by two to three million tonnes, Baron said. "Nevertheless, we feel even a deficit of such a magnitude may not be enough to trigger a structural price increase," he said, adding there was little hope for significant decrease in stocks accumulated in previous surplus seasons.
The biggest stocks are in India, the second largest sugar producer, which has an estimated 10-11 million tonnes, Baron said.
Other major inventories are in China, which holds 3-4 million tonnes, and Indonesia, which has about a million. "We have accumulated stocks everywhere and that means that as long as the stock is high, they should put some pressure on the price," he said. "This will curb any significant price advances until at least the end of the current season (September 30)," he added.
Industry officials said they expect fresh demand from China in the remaining months.
"I think China will import a total of one million tonnes of sugar this year.
However, one thing is for sure, they will not import as required by the WTO," said Baron. As part of its WTO commitments, Beijing is required to import 1.945 million tonnes of raw sugar in 2004 at a tariff of 15 percent. A 50 percent duty is imposed on imports exceeding that level.
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