JEDDAH — World sugar prices have risen dramatically since 2005 as the three years of deficit severely depleted global stocks, James Fry from the renowned consultation company LMC International UK, US, Malaysia and Singapore, said at a two-day seminar held recently at the Jeddah Hilton hosted by Mohammed Al-Klaiby, CEO of Savola Arabia, and Mazen Badawood, VP Savola Arabia. Presenting the market outlook for 2013 for both sugar and vegetable oils, Fry, however, said “we are moving back to a surplus again,” forecasting that sugar consumption is expected grow by 30-35 million tons in 2010-2020, mainly in Asia. Guests from over 50 companies interacted positively with the speaker whose presentation included market intelligence, analysis and future trends. Fry said Brazil produces about 20 percent of the world's sugar and is by far the largest exporter in the world, accounting for around 50 percent of global trade. What is special about Brazil is that over half of the country's cane harvest goes to make ethanol as a biofuel, rather than sugar, and this is done in the same sugar mills. Since most Brazilian mills can switch between sugar and ethanol output, any imbalance between sugar and ethanol prices will quickly lead mills to switch towards the more profitable product and bring their prices back into line with one another. Brazil drives world sugar prices, but the country's flex-fuel vehicles keep sugar linked to Brazilian gasoline prices and the prices set by Brazil's fuel policies are now high enough to stimulate sugar output in other countries. On vegetable oils, Fry noted that current oils prices are very high by historical standards. For example, in August 2012, palm oil prices were nearly 90 percent above their long run trend level. However, the wave of new supplies triggered by high prices will force palm oil to capture world market shares from the other oils, and this will keep palm at a discount to the other major oils for the foreseeable future. Applying income growth and the increase in population, the demand growth for oils for food will depend heavily on China and India. Taking global markets as a whole and combining all the segment forecasts for world vegetable oil demand, he estimated that the growth rate will be 3.3 percent from 2011 to 2025. Fry noted that biofuels have transformed agricultural markets. In relation to fossil fuel demand, biofuels have made limited inroads, slowing, but not reversing, growth in crude oil demand. In terms of agriculture, however, their impact is vast. For grain, oils and sugar crops, 15 percent or more of world output now goes to biofuels. Al-Klaiby said: “The Savola Group's firmly believes that sharing knowledge and information with partners and stakeholders is an integral part of our corporate responsibility as one of Saudi Arabia's leading organizations and makes a significant contribution to the advancement of the Kingdom's economic growth and development.” The Savola Group is one of the most successful and fastest growing multinational food groups in the Gulf and the Middle East Region, North African & Central Asian countries. Strongly committed to sustainable growth in all its operations, the Group operates in three key sectors; food (edible oils, sugar, noodles/pasta), retail and packaging. Enhancing its presence in the foods sector, the Group maintains a significant shareholding in Almarai Company and Herfy Foods Services Company, which form part of a wide portfolio of businesses that includes real estate and franchising. — SG/QJM
