12 November 2024
World sugar market development
The world market price for sugar reached a high point in November last year and traded continuously traded lower until mid-August when the effect of a drought in the main cane growing regions in Brazil became apparent. As if the drought was not enough, 400,000 hectares of cane fields were hit by wildfires. Although burnt cane does not get wasted, fires have a negative impact on the sugar content for the current year and an impact for next year in the form of a need to replant the fields. The market reacted instantly to the news and brought the price for raw sugar from sub USc18/lbs to USc24.71/lbs in late September. Subsequently, the market calmed down and closed October at USc22.74/lbs.
The Brazilian 2024/25 crushing season (Apr/Mar) had a very good start, but over the summer months, it became clear that the mills struggled to reach the anticipated level of cane allocation to sugar over ethanol. Furthermore, cane yields were negatively affected by the drought. Hence, talks about a sudden death of the crush emerged and analysts started to downgrade their production estimates from above 41 mln mt to around 39 mln mt. The sudden death of the campaign has, however, not materialized yet. In its latest report covering FH of October, the UNICA reported that the amount of cane crushed during the period reached 33.8 mln mt (+2.8 yoy), and the amount of sugar produced reached 2.4 mln mt (+8% yoy) to bring the accumulated figures to 539 mln mt of cane (+2.4% yoy) and 35.6 mln mt of sugar (+1.9% yoy). A total of 255 mills were still in activity as compared to 259 last year. However, the weather conditions have turned very wet since and the next report will certainly look very different.
The latest production estimate, gross ethanol diversion, from ISMA for the Indian 2024/25 season was increased to 34 mln mt as compared to their initial projection of 33.3 mln mt. More particularly, ISMA pointed out higher than previously expected planted acreage in the states of Karnataka and Maharashtra. The start of the cane season has been delayed to November 15th in the state of Maharashtra, as compared to the usual November 1st. However, the state election scheduled on November 20th could push the actual start of the campaign even later to potentially as late as early December. Whether or not India will export any sugar during the year will be dependent on the final allocation of cane juice to ethanol production. A decision is not likely to be taken until very late in their crushing season. Most analysts are, however, of the opinion that there will be very little volume, if any at all, allocated to export.
In Thailand, the 2024 monsoon brought good amounts of rain over the cane growing areas, with rainfall surpassing their normal levels by 9% during the May-Oct period. However, some reports are also suggesting more sunshine is needed for optimal cane development, while others suggest the drought impact from last year may still have an impact on current cane conditions. In fact, there are still a wide range of different estimates in cane production circulating on the market, bringing the sugar production anywhere from 10.4 mln mt up to 12.5 mln mt, up from 8.8 mln mt produced in the last season.
In China, 400kt of sugar was imported into the country during September, bringing the total imports during Jan-Sep to 2.9 mln mt, + 37% year-on-year. On top of that, 287kt of syrup were also imported, bringing the total for Jan-Sep to 1.7 mln mt, suggesting a 24% increase from last year. This pattern is consistent with the low stock levels situation in the country, following very low imports last season.
We have left a sugar marketing year (Oct/Sep) behind us with a surplus of approximately 4 mln mt and the outlook for the current 2024/25 is full of contradictory estimates. Some analysts are estimating a small surplus and others a small deficit. In the end, it seems like Mother Nature will decide where we will end up.