9 November 2023
World market development
After a rather sluggish summer, world market prices for raw sugar recouped lost ground during August and September. In early November prices broke through USc28/lbs – a level not seen in twelve years. The market is, as before, mainly driven by the shortfall in production in both Thailand and India during their 2022/23 seasons and even lower estimates for the upcoming 2023/24 season. The Brazilian harvest is closing in on record numbers, but it is not enough to cover the lost volumes elsewhere and to make things worse they face bottlenecks in the logistics chain and struggle to get the sugar loaded in the ports in time.
Rainfall received recently in the cane production areas in Centre South Brazil surpassed normal levels by as much as 40%, reducing crushing pace and logistic operations. In that context, the increased sugar production in Brazil will not relieve the overall tight sugar trade flow situation. In the port of Santos, some ships are waiting up to 30 and beyond days to load sugar. The latest UNICA report covering the first half of October confirmed a rapid slowdown of cane crushing due to wet weather conditions, with millers crushing a total of 32.8 mln mt of cane, a reduction of almost 10 mln mt as compared to the second half of September, but still showing an increase of 5 mln mt year-on-year. In terms of sugar, the production reached 2.2 mln mt during the period, 33% lower than during the previous period while still 22% higher year-on-year. Accumulated sugar production during the season stands at 34.9 mln mt, showing an increase of 6.7 mln mt, as compared to last year at the same time. The heavy rain means that more than usual of the cane will be left in the fields to be harvested just before the start of the next season.
The cane growing conditions in India has not improved lately, with rainfall observed during the month of October in the cane growing areas reduced by 74% as compared to normal levels. The Ministry of Agriculture estimates a drop of 11.4% in cane harvested for the upcoming season while the Indian Sugar Mills Association expects a drop of 7.9% drop in sugar produced – including sugar diverted to ethanol. At the same time most analysts are raising their projections for domestic consumption as the monthly sales quotas have surprised on the upside while market rumours are indicating sugar being sold above and beyond the quotas given. As a result, the Indian Directorate General of Foreign Trade confirmed that sugar exports will remain restricted until further decision and hence there are few or none in the industry that expects any Indian sugar to be available for the world market in the next 12 months.
The outlook in Thailand has worsened as well and analysts are downgrading their production estimates almost on a daily basis. According to the Thailand Cane and Sugar Board, the country should produce 8 mln mt of sugar in the coming season, down from 11 mln mt in the 2022/23 season.