“Sugar is simply too cheap to justify production in many countries,” said Berg in an interview before speaking at the F.O. Licht sugar and ethanol conference in Bangkok today. While declining prices have reduced incentives to produce sugar, demand continues to expand led by Asia, he said.

     Futures rose 0.2 percent to 17.71 cents on ICE Futures U.S.

today, poised for a 14 percent advance this month. The sweetener, which fell for a third year in 2013 for the longest such streak in more than two decades, bottomed out at 14.7 cents on Jan. 28 and has not traded at 20 cents since October.

                     Increasing Consumption

     “If the drought gets worse, prices could go up further,”

Tom McNeill, a director at Brisbane, Australia-based researcher Green Pool Commodity Specialists Pty, said at the conference.

Still, the “upside is limited” by global stockpiles, said McNeill. While the surplus may shrink to 0.6 million tons in

2014-2015 from 5.47 million tons a year earlier, reserves may expand to 75.6 million tons from 70.5 million tons, he said.

     Global demand may rise 2.2 percent to 173.7 million tons this season, driven by emerging-market consumption, Macquarie said in a Feb. 18 report. China may boost imports to run refineries, helping to soak up the surplus, it said. The European Union, Indonesia and China are the world’s biggest buyers, according to the U.S. Department of Agriculture.

     Prices will be in a range of 16 cents to 18 cents in the next few months as production may continue to outpace demand in

2014-2015 by 6.9 million tons from 7.7 million tons a year earlier, Stavros Dimopoulos, general manager at Sucden Asia, said at the conference in Bangkok today. Imports by China may drop to 3.4 million tons this year from 4.3 million a year earlier, while Indonesia’s purchases may be little changed at about 3.8 million tons, he said.

                         Indian Subsidy

     “While weather risk is providing short-term support, the historically high stocks-to-consumption ratio of 44.3 percent will contain prices within a narrow range in 2014,” Rabobank International said in a report received by e-mail yesterday.

India’s export subsidy plan could increase supplies, it said.

     The Indian government plans to subsidize as much as 4 million tons of raw exports over two years in a decision criticized by producers in Brazil and Australia. The country also announced interest free loans to help mills pay dues to farmers. Producers owed growers about 120 billion rupees ($1.93

billion) in arrears at the end of January, according to the Indian Sugar Mills Association, which estimates that the harvest in 2013-2014 will be the smallest since 2009-2010.

     Financial troubles at mills worldwide, including those of private mills in India, will curb cane crushing as sugar prices plunged and cane costs increased, said Berg.

     Global output will exceed demand by 4.4 million tons this season from 7.7 million tons a year earlier, said Berg. The extended dryness in Brazil will hurt sugar quality, which makes it more attractive to produce ethanol, he said.

     World demand is expected to increase steadily, with annual growth of about 3 million tons to 3.5 million tons, driven mainly by Asia, as low prices make sugar attractive for food ingredients and sweetening, and recovering economies boost consumption, said Berg.

By Supunnabul Suwannakij

--Editors: Ovais Subhani, Thomas Kutty Abraham

To contact the reporter on this story:

Supunnabul Suwannakij in Bangkok at +66-2-654-7324 or ssuwannakij(at)bloomberg.net

To contact the editor responsible for this story:

James Poole at +65-6212-1551 or

jpoole4(at)bloomberg.net