8 February 2023
World market development
The global sugar market has experienced a very tight supply situation during the last three months and prices have reacted quite violently. In November prices broke out of the USc17.5/lbs to USc19.0/lbs range to traded as high as USc20.4/lbs before falling back to USc19.0/lbs again. A push before Christmas brought price action above USc21.0/lbs where it, at the time of writing, sits comfortably. The main reason for the price surge is concerns over supplies as India has downgraded its crop expectation and although the Thai crushing season has started on a good note, there are worries in the market that the tail end of the crop will be disappointing. The white sugar market seems on the other hand to be better supplied in the short term as the front month white premium has fallen back to USD85/mt. Further down the futures curve, premiums do however remain well above USD110/mt.
In Brazil, the expected bumper crops of both corn and soybean, growing by 10% and 21% year-on-year respectively, are raising concerns about potential logistic limitation during the first months of the upcoming season. On January 25th, Petrobras increased gasoline prices by 7.5%, while hydrous prices immediately reacted, bringing its parity to sugar to USc16.9/lbs, still largely below current sugar price level. Petrobras pricing policy remains unclear and will surely bring more surprises to come before the new Brazil CS crushing season starts. The latest crushing update from the UNICA for the FH January confirmed a strong 45.9% split of the cane allocated to sugar production. Beside that specific element, the pace of cane being crushed during the inter-crop will not significantly affect the season cumulative volume. A total of 33.48 mln mt of sugar has been produced so far this season, surpassing last year’s 32.06 mln t by almost 1.5 mln mt. In the NNE region of Brazil, milling remained strong during the FH of January, with 3.44 mln mt of cane being crushed, up 7% year-on-year, while cumulative sugar production reached 2.25 mln mt, roughly on par with last year´s 2.24 mln mt.
In India, the 22/23 sugarcane harvest continues to make good progress – in terms of sugar produced. ISMA reported that during FH January, Indian mills generated a total 3.6 mln mt of net sugar, 3% higher than last year’s 3.50 mln mt. The total sugar production for the 22/23 season now stands at 15.7 mln mt, a record high for mid-January, and up 4% on the year. However, the adverse weather has affected cane quality negatively and the National Federation of Cooperative Sugar Factories revealed that Indian mills had processed 167.9 mln mt of cane to mid-January, up 8% on last year’s 155.7 mln mt and that sugar recovery has averaged 9.50% compared to last season’s 9.64%. ISMA has released their 2nd advanced estimate of sugar production, in which they lowered the estimate by 2.5 mln mt to 34.0 mln mt, raising concerns that lower sugar output could prevent the government from allowing additional exports to the initial 6 mln mt tranche.
In Thailand, the harvest is estimated to have reached 40.2 mln mt of cane by January 22 – 3% higher than last year at the same time. Total cumulative sugar production has reached 4.3 mln mt. The weather conditions remain very positive for the harvest activities with only 2.2mm of rainfall recorded during the month, representing only 18% of the normal rainfall level.
In Mexico, the ongoing sugar cane harvest is disappointing, bringing the cumulative sugar output 13% lower year-on-year, resulting of both lower sugar content (-4%) and lower cane yields (-8%). This will reduce dramatically Mexican sugar availability to be exported elsewhere than to the US, and potentially, force the US market to look for other import alternative if needed.
Due to the large downgrade of the Indian crop, global supply/demand balance for 2022/23 (Oct/Sep) suddenly looks a lot tighter than before. Current figures still point towards a small surplus, but any disruption in the supply chain or any further downgrade of crops can turn the current sugar market year into yet another deficit year.