Sugar Faces a ‘Big Surplus, Lower Prices,’ Coca-Cola Says

(Bloomberg) – The outlook for the global sugar supply and demand balance is for a “big surplus and lower prices,” according to Atlanta-based Coca-Cola Co. (KO), the world’s biggest soft-drinks maker.

Sugar supplies may outpace demand by 9 million metric tons in the 2011-12 season started in October, according to Singapore-based raw materials trader Olam International Ltd.Another surplus of 6 million to 8 million tons may follow in the 2012-13, Piero Carello, general manager of Olam’s sugar division in Europe, and John Stansfield, a senior analyst at the company, said at an interview on Feb. 4.

“The trend is for a big surplus and lower prices,” Jacob Robbins, managing director of global sweeteners at Coca-Cola Co., said at a Dubai sugar conference, which ends today. “We have to go with what the fundamentals are suggesting.”

Raw sugar traded in New York rose to a 30-year high of 36.08 cents a pound on Feb. 2 last year. The price then ended the year down 27 percent, the biggest drop in a decade, as traders sold the sweetener on anticipation of a surplus.

“We see a lot of talking up of the market,” Robbins said.“All I can say is we believe that it will be short-lived.”

Sugar may fall as much as 20 percent to 19.75 cents a pound this year as a surplus of sweetener overwhelms demand, according to the median of 16 traders and analysts surveyed at the Dubai sugar conference this week. The survey was published today.

Consumption Growth

The sugar surplus may shrink by 43 percent next season as consumption growth exceeds the 10-year average, according to the Lausanne, Switzerland-based broker and researcher organizing the conference in Dubai.

The surplus will drop to 5.5 million tons in the 2012-13 season starting in October from 9.7 million tons this season, Kingsman said in a statement today. Global use will jump 2.7 percent to a record 170.6 million tons, the broker said. That growth is higher than the annual average of 2.2 percent in the past 10 years, according to data from the London-basedInternational Sugar Organization.

“Two consecutive surpluses is bearish,” Olam’s Stansfield said on Feb. 4.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net