London, 16 December 2011

Czarnikow: In our August review, we highlighted the negative impact a lower Brazilian crop would have on the 11/12 sugar surplus. However, strong European production has now increased the 11/12 surplus to 6.1m mtrv, with aggregate global production achieving a new record of 177.1m mtrv.

Growth has been encouraged by high prices, with global production up 26.0m mtrv since the 2008/09 season. Much of the production growth has come from the beet sector which has increased production by 21%. However, since 2000/01, beet production has in fact only grown by 6%, while cane production, which is now 46% higher, has been the main driver behind the expansion in supply. It is hard to see the same level of growth being achieved in the future without further investment in the cane sector.

- Year-on-year production growth is forecast to be 9.0m mtrv, predominantly due to higher beet production.

- Beet sugar production is expected to reach 38.7m mtrv, a 21% year-on-year increase.

- Cane production is forecast to rise to 138.3m mtrv from 136.0m mtrv.

- Consumption is expected to be 170.5m mtrv in 2012, up from 167.8m mtrv in 2011.

With prices stabilizing, the market should now be entering a more positive period for sugar consumption growth despite the poor global economic climate.

European Union

- EU beet production has been revised up by 0.3m mtrv to 18.2m mtrv, almost 3m mtrv higher than last year.

- The EU is likely to produce a surplus of out of quota sugar of around 1 million tonnes, which will be carried forward into next season.

- This is likely to lead to a reduction in spring beet plantings across the region.

Russia & FSU

- Russian production has been revised upwards to 5.4m mtrv, from 5.0m mtrv in August and 3.0m mtrv last year.

- Favourable weather has seen beet yields rise to 39 tonnes per hectare, from 23 tonnes last year.

Brazil

- Brazil sugar production is estimated at 38.5m mtrv, down 2.5m mtrv on last year’s total.

- Agricultural yields in CS Brazil will average just below 70 tonnes per hectare for the season, down from 83 tonnes last year.

- The main feature this season has been the allocation to sugar in preference to ethanol. This season’s sugar allocation has been the highest seen in 5 years.

India

- Indian production is forecast to rise to 27.6m mtrv, from 26.3m mtrv last year.

- Domestic prices were strong in late November, rising to Rs.35/kg in Uttar Pradesh a 20 month high, demonstrating low stocks.

- Czarnikow estimates consumption at 26.0m mtrv in 2012, and believes that consumption has been growing above population rates in recent years.

Thailand

- 11/12 cane crop predicted to be 103 million tonnes, slightly above last year given the earlier start to the crop.

China

- Cane sugar production is projected to reach 11.5m mtrv, 10% more than last year.

- Beet production predicted at 1.1m mtrv, bringing total production to around 12.5m mtrv.

- However, with consumption at 15.5m mtrv the country will remain in deficit.

Toby Cohen, Czarnikow director, said: “The third estimate of the 2011/12 balance confirms a surplus, and while sugar market is de-risking after three consecutive years of deficit, it remains vulnerable to any unforeseen production shocks and export availability concerns.”

Peter de Klerk, Czarnikow analyst, said: “While the growth in production this year has been driven by the beet sector, the challenge for the sugar industry is to facilitate future growth in cane sugar production.”

Ends --