Middle East & Africa To Take The Lead In Sugar Demand Growth


BMI view: Recent strong sugar import data from the Middle East and Africa shows that these regions are taking the lead in expectations for demand growth in the coming years. Strong production potential for Tanzania, Zimbabwe and South Africa will encourage consumption growth locally while subdued global prices will boost sugar demand from importers (Egypt, Saudi Arabia, Tunisia and Morocco). Over the long term, we believe sugar demand growth in Africa and Middle East could pick up by more than in Asia because of base effects and less inequality in growth profiles.

Recent strong sugar import data from the Middle East and Africa shows that these regions are taking the lead in expectations for demand growth in the coming years. Anecdotal reports have pointed to sharply higher import demand from both regions over the summer 2013, with imports turning more massively to refined sugar at the expense of raw, mainly as the refined variety trades at a smaller premium to raw sugar. The USDA forecasts sugar demand in major markets in both regions to grow by an average of 59.0% between 2009/10 and 2013/14, with the strongest growth seen in Tunisia, Ghana and Saudi Arabia and the weakest in South Africa. These reflect the very different sugar consumption pictures across the two regions, with very low consumption per capita in most of Africa, while some markets in the MENA (Egypt, Saudi Arabia) and South Africa have already average to high levels of sugar demand per capita.

Tunisia & Zimbabwe On Top
Select Countries - 2009/10 to 2013/14 Consumption Growth (%)

We believe strong production potential for Tanzania, Zimbabwe and South Africa will encourage consumption growth locally. Moreover, subdued global prices will boost sugar demand from importers (Egypt, Saudi Arabia, Tunisia and Morocco). We forecast production in Tanzania, Zimbabwe and South Africa to grow by an average of 32.5% out to 2016/17. For Zimbabwe and South Africa, we see local consumption taking a larger share of production over the coming years, with demand representing 60.0% and 57.7% in 1998 and expected to reach 78.0% and 95.3% respectively by 2016/17. These two countries will remain the major exporters in the region, which leaves more room for domestic consumption to grow in the medium term. For Tanzania, we believe the ramp up of investment in production will help cover a larger part of the country's sugar needs, but still leave the country slightly dependent on imports.

Taking Over The Global Market
Select Regions - Sugar Imports (As % Of Global)

On the other hand, we believe importers such as Egypt, Saudi Arabia, Tunisia and Morocco will see their share of global imports rise in the coming years, as demand will be boosted in the short term by subdued sugar prices. Countries in the Middle East and North Africa will increase their share of global imports from 24.7% in 2002/03 to 34.7% in 2013/14 according to the USDA. This will be supported by low global sugar prices in the context of uncertainty over the political situation and unrest over hardship of economic conditions (including food price inflation). The strategy for these countries will be to run high stocks in anticipation of recovering growth and a recovery in the sugar demand outlook.

Subdued By Recent Standards
Front-Month ICE Sugar (USc/lb, weekly)

Over the long term, we believe sugar demand growth in Africa and Middle East could pick up by more than in Asia because of base effects and less inequality in growth profiles. In fact, we forecast sugar consumption to grow by 20.8% out to 2016/17 in Africa and Middle East on average, while sugar demand should rise by 16.7% over the same period in Asia. This is because, apart from some heavyweights such as China and Indonesia with average demand growth forecast around 30.0% out to 2016/17, the rest of Asia will see demand averaging around 14.1% over our forecast period. For Africa and the Middle East, we forecast average growth over 30.0% out to 2016/17 in five markets (Zimbabwe, Nigeria, Tanzania, Algeria and Iran).

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