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Asia and Africa are getting a whole lot sweeter — at least according to a new report from Rabobank.
The report, Global Sugar, 2021, says the two continents are going to see significant growth in sugar consumption.
Annual Global sugar consumption is projected to grow from 166 tons to 203 tons by 2020-2021, and the leading rise of global consumption will be Asia, where consumption is expected to rise from 75 million tons to 97 million tons over the same period.
However, in percentage growth terms, Rabobank expects Africa to have most growth, with a 3.4 percent annual increase, compared to 2.9 percent for Asia and 2.1 percent for South America.
"The Asian region is expected to remain the powerhouse of global sugar consumption and imports, but local production in key countries such as China, Indonesia, Thailand and India is also projected to rise strongly,” says Andy Duff, Rabobank's global strategist for sugar.
He says crop yields and crop quality is relatively low though, which means there’s room to invest in technology, research & development and extension services for sugar farmers in that region.
As for Africa, Duff says there’s no shortage of interest in new sugar production projects in the continent, where consumption growth is high and the cost of moving freight from the cost to the inlands is high, making the local market prices well above world market prices.
Even if some of the planned projects in the region don’t become a reality, sugar production in Africa is still expected to grow significantly in the coming years.
“The political environment at the national, regional and local levels is likely to be pivotal in the development and implementation of new projects in Africa," Duff says.
Global sugar trade
On the Global scale, Rabobank expects the sugar trade to reach 64 million tons of raw value by 2020-2021, which would be an increase of 22 percent.
However, the increase is less than the projected growth in consumption, which is 25 percent, which means there should be significant growth of production in some parts of the world that have historically been substantial importers, such as Russia.
"India, the second largest producer and the largest consumer of sugar in the world, has shifted from being a net exporter to a net importer and back again, making it a pivotal participant in the global sugar market," added Duff.
He also says that although weather is a key driver in seasonal production swings, governmental policies have had a major impact. In the near future, the removal of the levy sugar obligation and the abolition of the quarterly release mechanism, effective as of the 2012-12 season, will provide immediate relief to the Indian sugar sector.
“This partial de-control should create a more positive investment climate and large and well-managed players will have competitive advantages with an opportunity to grow," Duff explains.
As for Imports, Asia is projected to maintain its dominant share of global imports.
However, South America's share of global imports is also expected to rise, driven by continued consumption growth in key countries where local production growth is not expected to keep up.
Meanwhile, Europe's share of imports is expected to decline very slightly, largely as a result of increasing production in Russia (until recently the world's leading importer of sugar) and the Ukraine. This decline could be greater if EU sugar quotas were to be abolished at some point during the forecast period.
On the other side of the coin are exports, and here Brazil, Thailand and Australia are expected to remain the world's top three exporters, each increasing their share of global exports up to the 2020-21 season.
Rabobank expects Brazil to remain the world's most important exporter. However, unlike the last ten years, when Brazil's share of world market exports grew from 25 percent to 46 percent, Rabobank's projections suggest that future growth in Brazilian sugar production and exports will be more gradual, raising the country's share of total world sugar exports to 50 percent by 2020/21.
Thailand is also projected to increase its market share from 11 percent to 14 percent, and Australia is expected to make modest gains (rising from 5 percent to 6 percent).
The combined market share for the rest of the world's exporters is projected to decline from 37 percent to 30 percent, and Rabobank's forecasts effectively point to a continuing concentration of global sugar exports over the next ten years.