DJ UPDATE:World '09 Sugar Demand Growth To Slow To 1%-BNPP Fortis
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High sugar prices are likely to curtail world demand in the near term, although a swift global economic recovery could see a return to the average trend, BNP Paribas Fortis said Tuesday in its monthly agricultural commodities report.
The bank forecasts world sugar demand to grow by 1% in 2009, compared with the average rate of about 2.66% a year over the past decade.
"The very much higher prices now having to be paid by consumers in countries where demand growth has been projected to be at its strongest - for example in India and other emerging markets in Asia - is bound to dent demand," said the report.
Sugar consumption is closely linked to income growth, making the strength and speed of the global economic recovery key to the demand outlook, it said.
"Given that Asian markets currently are doing significantly better than those in the West, sugar consumption growth next year globally is easily likely to get back to 2% a year," said the bank.
World sugar prices have almost doubled since the beginning of the year to see ICE futures U.S. world raw sugar March contract trade at 22.78 cents a pound as at 1130 GMT.
The sharp rise in prices has been driven by a fall in world production after India--the world's second-largest sugar producer--saw farmers switch from growing sugarcane to other more profitable crops when planting decisions were made.
The fall in output meant India swung from being an exporter of sugar to an importer.
"Not until the 2010-11 season will we see Indian production rise enough to make the country self-sufficient once again - and even that is not guaranteed," said the report.
The bank said it is possible raw sugar futures may spike to 30 cents a pound in the medium term given the tight supply outlook.
-By Sarah McFarlane, Dow Jones Newswires; +44 (0) 20 7842 9327; sarah.mcfarlane@dowjones.com
(END) Dow Jones Newswires
12-01-09 0649ET
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