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Emerging economies to drive sugar demand

London, January 29, 2008

Sugar demand should grow strongly in emerging economies such as China and oil-rich states in the Middle East and Africa, and the impact of a slowdown in the rich world should be neutral, a senior sugar merchant said.

Alan Wood, managing director of London-based Czarnikow, said he expected global sugar demand to rise by 2-3 per cent year on year in 2008, similar to growth rates in previous years.

Czarnikow estimated that global sugar demand grew by 3.2 per cent in 2007 and 1.8 per cent in 2006.

'The downturn is unlikely to impact on demand for sugar - in a general, macroeconomic way,' Wood told Reuters in an interview on Monday.

'In the United States and Europe, sugar is such a small item in the (shopping) basket that we are quite insulated.'

His remarks echoed sentiment by Peter Baron, executive director of the International Sugar Organisation (ISO), who told Reuters last week: 'Sugar has proven to be robust in a downturn.'

Wood was speaking before the Feb.3-5 Dubai 2008 sugar conference, organised by consultancy Kingsman SA and Al Khaleej Sugar, which is expected to attract hundreds of senior sugar traders, merchants and analysts from around the world.

The Czarnikow MD said that despite the tough economic outlook, consumption of sugar was set to post double-digit growth in China in 2008 as people's dietary habits change with rising incomes.

'You will see the impact in demand for processed foods and soft drinks. We are talking about a young population (in China) with more disposable income,' he said.

Toby Cohen, global head of analysis at Czarnikow, said consumption growth momentum would come from the cities rather than rural areas in China.

Wood said sugar demand had exploded in African and Middle Eastern countries, such as Sudan, that have benefited from the boom in oil prices.

These trends were less likely to be directly affected by a US-driven global economic slowdown though a tightening in global credit could impact on the mechanics of the market.

Rising demand will help eat into a huge global sugar surplus estimated by Czarnikow at just under 10 million tonnes in 2007/08 and projected to fall to a surplus of about one million tonnes in 2008/09 due to a fall in EU output on institutional restructuring and an expected drop in Indian cane planting.-Reuters




Tags: China | sudan | demand | Sugar | economies | emerging |

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