Asia will become increasingly dependent on food imports from the West to support rising living standards, and in the sugar market affordable prices will drive demand up, sugar merchant Czarnikow said on Friday.
Sugar prices are trading at close to the lowest levels in more than 2-1/2 years as record cane output in top exporter Brazil and higher-than-expected production in Thailand and India are expected to increase surplus supplies.
A recent fall in sugar prices does not equate to falling demand, and global trade in sugar has been running at record levels, London-based Czarnikow said.
This is in contrast to the idea that the boom in demand for commodities is over, it added.
“While the Asian economies have the greatest growth potential both in terms of industrialisation and the development of their own consumer markets, they will become increasingly in need of the agricultural production of the West,” it said.
“We believe that it is these trade flows that are likely to become ever more critical to the global trade cycle.”
Land availability in Asia, and the potential to expand agricultural production, is limited, said Toby Cohen, a director of Czarnikow.
The biggest markets for raw sugar today are Indonesia and China.
“The Americas, particularly Brazil, are where the potential for growth is coming from,” Cohen said.
“Sugar prices have been falling because of the production response to high prices, not because of falling demand,” Czarnikow said, referring to a period in late 2011 and early 2012 when sugar prices were much higher due to a combination of adverse weather and ageing cane in Brazil.
“Affordability is rising, which is helping demand growth.”
Cohen said that growth in sugar demand was largely driven by low-income consumers.
“Consequently rising affordability for sugar, and across the food sector, is positive for consumption growth,” he said.