Czarnikow has tightened its forecast for world sugar supplies – the market's second downgrade in two days - despite highlighting the increased competition from corn syrup in the sweeteners market.
The sugar merchant cut by 3.8m tonnes to 165.0m tonnes its forecast for world production of the sweetener in 2010-11, meaning growth came in at half the level it had initially expected, following weather setbacks in producers from Brazil to Australia.
However, Czarnikow also trimmed by 1.2m tonnes its forecast for consumption, flagging "slowing physical offtake at higher prices", which last month hit a 30-year high of 36.08 cents a pound for New York futures.
"It is clear that there has been limited growth and rising substitution over the past few seasons in response to higher prices," the group added.
"Indications are that consumption growth has been constrained in part as a result of corn sweeteners capturing a greater share of sweetener demand."
Sugar vs corn syrup
Czarnikow highlighted "rising substitution" in markets such as China and Mexico, which "seems happy to accept cheaper fructose sweeteners as a replacement for the beverage industry".
The observation tallies with reports from corn processors such as Tate & Lyle of increased sales to Mexico of high fructose corn syrup, despite a price rise which the International Sugar Organization pegged on Monday at 22% since September.
"Even after the recent rise in spot values, the relative price of high fructose corn syrup remains 40% lower than sugar's," the ISO added.
The ISO added that production of corn syrup "is anticipated to increase in order to satisfy growing demand by Mexico's food and beverage industry", although the sweetener is expected to continue losing out to sugar in the US, where its popularity has been dented by alleged links to obesity.
Growing shortfall
Czarnikow's calculations increased the global deficit in world sugar supplies in 2010-11 to 3.7m tonnes, from 2.8m tonnes.
The shortfall took the total shortfall in three successive seasons of deficit to 28.2m tonnes.
On Monday, the ISO also downgraded its forecast for world production by 910,000 tonnes to 168.05m tonnes.
However, with consumption pegged at 167.85m tonnes, ISO the estimates kept the market with a small surplus.
The organisation, unlike some other observers, draws up its figures strictly to an October-to-September crop year.
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