DETERMINANTS OF DEMAND FOR SUGAR : EMPIRICAL EVIDENCE FROM MALAYSIA Negar seyed soleimany Abstract Malaysia’s sugar demand is forecast to exceed 1.9 million tonnes a year by 2020 compared with 1.4 million tonnes presently, as the growth in the country’s economy and population spurs consumption of sweeteners for food and beverage products, according to Rabobank International. Adam Tomlinson, director of food and agribusiness research and advisory with Rabobank, said Malaysian sugar demand was likely to grow 3% a year from now till 2020. In historical terms, Tomlinson said sugar demand in the country had risen 3.4% annually between 2000 and 2010. “Malaysia’s key sugar demand driver appears positive for the medium term. Sugar prices have shifted to higher levels and consumers are paying more. Malaysian sugar prices are tracking a similar path to nearby countries,” Tomlinson said here yesterday during a media briefing on the global sugar industry. In the region, Malaysia has the highest per capita consumption of sugar at about 50kg compared with the estimated 35kg in Thailand and 20kg in Indonesia.According to Tomlinson, Malaysia is also a key importer of raw sugar with an increasing dependence on Brazil, the largest global exporter of the commodity.“Malaysia is focused on raw sugar for further processing domestically rather than sourcing for processed white (sugar),” he said.Tomlinson: Sugar prices have shifted to higher levels and consumers are paying more. Last year, Malaysia imported 1.6 million tonnes of sugar, accounting for 5% of the total global trade of 31.54 million tonnes, according to Rabobank.Sugar demand across Asia is primarily driven by China and India, which collectively make up 59% of consumption in the region. This is followed by Indonesia, Pakistan and Thailand which collectively account for 19%.Brazil now supplies 47% of Malaysia’s sugar requirements, compared with merely 5% in 2000. In contrast, Australia’s portion has shrunk to 25% from 47% during the period.At 18.6 million tonnes last year, Brazil commands 56% of the world’s raw sugar export market of 33.2 million tonnes. Australia came in second at 2.85 million tonnes or 9%, while India is ranked third with 2.63 million tonnes or 8%. Thailand, the fourth largest exporter, sold 1.94 million tonnes to global buyers last year, accounting for 6% of the world’s raw sugar supply market. Note that prices of sugar futures have declined in anticipation of a larger output from Thailand. It is anticipated that the country’s sugar production will surpass 9.5 million tonnes in the 2010/2011 period. This compares with the earlier projection of 7.7 million tonnes made last March.Despite the short-term downward pressure on prices, global sugar inventories are expected to remain at low levels by historical standards. As a result the market remains vulnerable to one or more weather shocks in key producing countries, according to Tomlinson.
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- Fall '13