6 June 2023
World market development
The sugar market continuously surprised on the upside during the spring months, reaching as high as USc27.41/lbs by the last days of April. The tightness in the market has been felt by the consumers who have been the market segment pushing prices up according to the CFTC position reports. Shortfalls in Thai and Indian production coupled with tight regional markets, means that Brazil is the only sizeable origin available for the next couple of months. The outlook does however remain tight as the 2023/24 production estimates for two of the largest producers, India and Thailand, has been downgraded by most analysts due to weather concerns and shift of crops in Thailand.
After some rain stoppages in April, the new crushing season in Brazil has picked up speed as the weather eventually turned favourable for harvesting activities. Less than 10% of the normal rainfall was observed during May and a record 44mln mt of cane was crushed during the first two weeks of the month. The dry weather was also reflected in the high sugar content. Sugar allocation was very high at 48.4%, the largest sugar mix since 2006/07 for that time of the season. Consequently, a record amount of 2.53 mln mt was produced during the period, showing an increase of +50% compared to last year. Cumulated since the start of the season, a total of 79 mln mt of cane has been crushed, an increase of 24% yoy, while a total of 4.1 mln mt of sugar was produced, 48% higher than last year. There were 237 mills crushing as of 15th of May, 2 more than last year at the same time. In the context of large crops of both soybean and corn, it is interesting to note that sugar exports have seriously accelerated in May with a decent total of 2.06 mln mt exported during the month at the time of writing (as compared to 1.8 mln mt last year). This is a sharp acceleration from last month exports in April when a modest 1.07 mln mt were exported during the month, reflecting more the very low availability in the country than the apprehensive potential logistic bottlenecks.
India has all but finished the season and the expectation is a final production of 33.0 mln mt, 2.8 mln mt lower than last year. All eyes are now on the upcoming monsoon, which is expected to arrive on June 4. The Indian Meteorologic Department is expecting it to bring only 96% of the normal precipitation. Current market estimates for production during the 2023/24 season are similar or slightly below this year.
Thailand season came to a rather abrupt end and the total production amounted to 11.0 mln mt. Well below the expected 12.5 In Thailand, the fears of a weather pattern affected by the developing El Nino conditions are slowly turning into a reality with only 67% of the normal rainfall recorded during the month of May, which usually mark the start of the rainy season. Cumulatively since January, this is only 52% of the normal rainfall amount that was experienced in the main cane producing regions. One other source of concerns for sugar cane growers are the government policy for cane harvesting and air pollution. With the election just behind them, they fear another wave of unfavourable regulations for the sugar cane sector, leading to significantly higher costs of harvesting and labour shortages. Due to small growers shifting from cane to cassava, market analysts are expecting the cane harvest to be 15% lower year-on-year in 2023/24.