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Czarnikow forecasts, small, world sugar deficit

Czarnikow highlighted surprising strength in world sugar output, even as it forecast a production deficit in 2014-15, in the latest of a rather disparate set of estimates major commentators on global supply and demand.

The sugar merchant, in its first estimates for next season, forecast that world growth in consumption of the sweetener will rise by 2.1% to 183.8m tonnes, raw value.

Coupled with 1.0m tonnes of loss down to "unrecorded disappearance", demand will outpace global production by 500,000 tonnes in 2014-15 - returning the market to deficit after four seasons of surplus.

However, given the weakness in prices, which "languish below cost", the world might be expected to be on for a bigger shortfall, Czarnikow said.

'Can't go on for ever'

"Despite low prices, pressure on farmer incomes and destruction of producer returns, we are yet to see the large response in worldwide production which might be expected," the London-based merchant said.

In fact, production was termed "strong" by Stephen Geldart, Czarnikow senior analyst.

"This reflects the support that many industries have received and the degree to which loss-making producers can continue to operate as long as variable costs are covered," he said.

"But this cannot continue indefinitely," he added.

Producer forecasts

Production will show significant growth in Thailand, the second-ranked sugar exporting country, where returns from cane remain above those from cassava and rise, and output of the sweetener will rise 700,000 tonnes to a record 12.8m tonnes, raw value.

In the European Union, output will rise nearly 5% to 17.7m tonnes, boosted by a battle among producers for market share as the removal of quotas looms, and helping drive world beet sugar output 1.2m tonnes higher to 36.3m tonnes.

The important Brazilian Centre South cane harvest was seen falling to 561m-578m tonnes in the current crushing season, from 596m tonnes last time - sufficient for sugar output of 32.6m-33.2m tonnes, down from 34.3m tonnes.

Czarnikow added, that in the Centre South, responsible for some 90% of cane output, "sugar and ethanol returns have not been sufficient to meet operating costs and mills have reduced expenditure, particularly on cane plantings and field maintenance.

"Investment in the fields is low and weather conditions have been poor."

Range of forecasts

The merchant's forecast for the 2014-15 sugar balance sheet is the latest in a series, with analysis group Platts Kingsman earlier this week raising its estimate for a production deficit to 2.094m tonnes, from 239,000 tonnes.

The Swiss-based group cited the threat of a "sudden death" to the Centre South cane harvest, as viable crop runs out.

However, ED&F Man last week forecast a production surplus of 2.8m tonnes, an upgrade of 400,000 tonnes from its previous forecast.

The Czarnikow estimates also factored in a rise of 1.9m tonnes to 27.9m tonnes in output in India, the second biggest producing country, in 2014-15, reflecting the replanting of fallow land in Maharashtra.

Indian output will exceed consumption by 700,000 tonnes.

In China, a key importing country, production will fall 600,000 tonnes to 13.2m tonnes, after farmers crushed seed cane last season, in expectation of weak prices ahead.

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