7 June 2021
World market development
Sugar prices had a flying start to the year and raw sugar prices reached as high as USc18.94/lbs in February – more than 100% compared with the low point in April 2020. Another small harvest in Thailand coupled with stronger than anticipated demand from China has kept sugar flowing out of Brazil and India. Prices eased of after the expiry of the March future and reached as low as USc14.67/lbs before climbing north again to reach USc17.80/lbs at the time of writing this report.
In Centre/South Brazil, sugar mills delayed the start of the crush in order to allow the cane to mature in the fields. The cane is hit by the persistent dry weather and market analysts have gradually downgraded the estimated size of the total production in 2021/22 (Apr/Mar) from 36.5 mill mt towards 34.5 mill. mt – down from last year’s 38.5 mill. mt. By the first half of May 234 mills in operation, as compared to 240 last year, had crushed 86.3 mill. mt of cane (-16.2% year-on-year) and produced 4.5 mill. mt of sugar (-17.5% year-on-year). Sugar/ethanol ratio was 44.5% vs 44.2% during the same period last year. It is still too early in the season to draw any clear conclusion as the cumulative figures are mostly reflecting the late start of the crop. The dry conditions have certainly favoured harvesting activities, but at the same time further deteriorated the late crop potential, which obviously will be the key to the final figures for the overall 21/22 crop. The ethanol parity has increased further and is now almost at par with the sugar price.
In India, the sugar production has reached 30.5 mill. mt by mid-May, confirming the crop should end at about 31 mill. mt, net of 1.9 mill. mt of sucrose diverted to ethanol. Recent feedbacks are suggesting that unsubsided exports have taken place recently. However, with only 4.6 mill. mt of sugar exported so far, out of the almost 6 mill. mt already committed for exports, the logistic limitations will limit further export volumes in the coming weeks before the monsoon season eventually starts.
Thailand ended their 2020/21 crush with a 11% drop in cane crushed and 8.7% of sugar produced to total 66.6 mill. mt of cane and 7.6 mill. mt of sugar. The two year drop in production of 48% is due to a combination of lower cane areas and a persistent drought in the region. So far in rainfall in 2021 have surpassed last year by 55%. However, rainfall during the month of May have dropped below the normal, recording only 68% of the long-term average. There is still a relatively wide range of forecasts amongst market participants for the 2021/22 crop forecast ranging from 80 mill. mt to 100 mill. mt of cane equaling 9 mill. mt to 11 mill. mt of sugar.
Sugar analysts at F.O. Licht are estimating the global supply/demand deficit for 2020/21 to 3.4 mill. mt while the balance for 2020/21 is pegged at a very small surplus, which have significantly reduced the probability of a return of raw sugar prices to the low teens in the next 6-12 months.