London, 14 September 2011

The 11/12 season is expected to see the sugar balance sheet return to surplus: However, the size of that surplus is already in question. When Czarnikow published their initial analysis of the 11/12 balance sheet in May, they expected to see a large rise in global production based upon early optimistic crop projections.

However, even though it is still very early in the cycle and many countries have not yet begun producing sugar, it already seems as though growth will not be as strong as first thought. The lower crop in Brazil has been dominating headlines and as a result, growth in global production is now entirely dependent upon better crops in a larger range of countries.

Today it looks as though Europe is set to deliver much of the growth forecast in the 11/12 season while export-oriented producers such as Brazil, Australia and South Africa will see production unchanged or lower. Higher prices have certainly encouraged producers to expand but, as the results are showing, the market remains challenged to meet growing demand.

- The surplus has halved since May 2011 to 5.3m mtrv from 10.3m mtrv.

- Production growth has been revised down from 14m mtrv to 9m mtrv.

- Global availability is now forecast at 176.3m mtrv in 2011/12, up from 167.7m mtrv in 2010/11.

- Consumption is expected to grow from 167.6m mtrv in 2011 to 170.5m mtrv in 2012.

- Sugarcane production is projected to rise to 138.2m mtrv from 135.6m mtrv last year.

- Sugarbeet production is expected to increase to 38.1m mtrv from 32.2m mtrv last year.

Brazil

CS Brazil cane total has been revised to 498 million tonnes from our initial estimate of 575 million tonnes. This is largely as a result of deteriorating agricultural yields, dry weather conditions, flowering cane, frost in early July and the average age profile of the crop reaching 4.1 years.

As a result of strong prices, the CS Brazil sugarcane industry has maximized sugar production where possible.

The focus on sugar production in Brazil has come at the expense of ethanol.

India

Sugar production in India is expected to increase by around 8% on the 10/11 season. However, this is significantly lower than the 25% growth seen last year. India is projected to post a small production surplus and should see continued world market exports in 11/12.

EU

EU production has been revised up by 0.5m mtrv to 17.9m mtrv, due to excellent beet crop prospects. 2m mtrv of exports are expected this coming season.

Russia

Beet production estimate has increased by 0.7m mtrv due to excellent beet test results. However, due to lack of infrastructure, some acreage is likely to be left unharvested.

Toby Cohen, Czarnikow director, said: “The revision in our forecast in the light of the downgrade in crop prospects for CS Brazil shows the region’s central position within the global sugar market.”

Peter de Klerk, Czarnikow analyst, said: “Although we still anticipate a surplus, it may not be enough to protect the market from unforeseen production shocks or shortages. Further improvements in production and stocks will need to be realised for the market to be in a position to withstand disruptions to supply.”

Ends --

Czarnikow Group is one of the most respected names in agricultural commodity markets and has been providing high quality market services since 1861. Czarnikow operates in three core areas; sugar, biofuels and corporate finance. Its success is built upon knowledge of the market, confidentiality, reliability and independence.