Consultant Martin Todd has analyzed and studied agricultural commodities for over 25 years. Currently, he is the General Director of British consulting firm LMC International, where he is responsible for extensive research concerning the starch and sugar-energy fields. During an exclusive interview with BIO&Sugar Magazine, Todd spoke to us about the world sugar market.
Bio&Sugar Magazine – What do you think will happen with sugar prices in the near future?
Martin Todd – Sugar prices dropped significantly over the past few weeks after occurrences such as a larger production than was expected was announced (especially in Thailand, but also in Pakistan), the decision by India to allow more exports and the perspective of an international crop surplus in 2011/12. My opinion is that sugar prices will continue to fall, especially due to the fact that production in the Central and Southern regions of Brazil should pick up soon. However, I think that market prices will be above 20-22 cents/lb (although it is possible that prices will fall below that for a short time).
Do you think that India’sincreased exports of 500 thousand tons of sugar will have an impact on the market?
India’s decision is one of the factors which created this feeling across the market. However, the unexpected increase in sugar production from Thailand overshadowed this announcement.
The European Union is in a tight bind concerning sugar supplies. How do you see this problem being solved, apart from allowing increased imports?
The sugar supply shortage in the EU is a complicated story. Putting it simply, this situation was created through insufficient importation to fill the void between consumption and local production. One of the reasons for this is that prices in the EU have not been high enough to attract imports. Another factor is lower production than expected in supplier countries. The EU can solve this problem in two ways. First, it can allow imports from the world market by reducing duties (currently this is being done for 300,000 tons). Or, it can allow the sugar producers within the EU to sell part of their “non-quota sugar” to the EU itself. Usually, this is not possible because this “non-quota sugar” is ear-marked for other uses (exports and ethanol). The European Commission recently allowed producers to sell a half million tons of this sugar on the EU market. We will have to wait and see how much sugar the EU suppliers will produce next year before we find out if the European Commission adopts similar measures in the future.
What was the key to the surprising sugar production in Thailand?
That is something that people are still trying to figure out, including the Thai producers! Obviously the weather was a factor, but I think that an even more important fact is that growers who planted manioc root started growing sugarcane. The reason for this change is that the manioc crops in Thailand were affected by a plague which reduced production. This means that, although manioc prices were higher, sugarcane earned a greater profit for the farmers.
The Brazilian government, concerned with low ethanol reserves in the country and consequently higher prices, has been studying ways to intervene and force the sector to focus on biofuels instead of sugar. The levying of a tax has even been considered. What is your opinion?
Brazil plays a key role in the world sugar market. This means that if a tax is added, a large part of this cost will affect global prices, because, for the short term, there is no alternative but to purchase sugar from Brazil (especially raw sugar). Unless the entire world has a great surplus of sugar, any policy which has an effect on the production balance of the mills will reduce the supply of Brazilian sugar and this could have a dramatic impact on the world sugar market.