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AS OF THE END OF FEBRUARY, INDIA EXPORTED 2 MLN M/T OUT OF THEIR 5 MLN M/T EXPORT “PLAN” (US$ 156 INCENTIVE).


When we look elsewhere in terms of acreage, what we saw in 2017 and 2018 was the peak of expansions in Thailand, Pakistan, India and the EU. What we may experience in 2019 is that “commercial sense” will start prevailing and the EU and Pakistan may reduce acreage.. Thailand may not have expanded but had no serious reduction on land.


So, we may see some contraction in 2019 and mother nature will determine the Agri  lower. The EU may be like last year as better Agri yields may be compensated for a smaller acreage.


India, contrary to many other producers have ignored market forces, as their main market force has been a supportive and understanding government that is supporting farmers with a decent cane price (<$ 42 per m/t) and via millers is “contributing” to an income shortfall. India is not making allowance for the world market to adjust itself to the current S and D, which  being pumped out of India at very generous prices.


As of the end of February, India exported 2 mln m/t out of their 5 mln m/t export “plan” (US$ 156 incentive). So with 3 mln m/t to go, their prices are$ 30/50 per m/t less than what many other producers would start to contemplate selling at.


Based on current production estimates, taking consumption into consideration, we estimate that March/April 2018/19 had a surplus of 2,2 mln m/t (raw value), down from 12,8 mln m/t surplus in 2017/18.


With crops still being harvested and some still being planted, we estimate March/  1 to 2 mln m/t (Raw value) for the time being. In the longer term, unless prices are stronger than 14/15 or more, we may not see a surplus as Brazil would not have the incentive to improve their sugar mix.


Lower margins for producers are not allowing prosperity to return. Low prices are supportive to consumption, although food habits reduced consumption growth.


Perhaps a more long-term approach to the sector by all, especially by India , may bring light to this long lasting “misery” to producers, likely via bio-fuels, which would support their carbon reduction programs, reduce their dependency on imports (and foreign currency). Producers have time to enjoy bio-fuels, till the next generation of vehicles (electric) takes over!


Alberto Peixoto E: albertopeixoto@apcommodities.london T: 07570 714 981


33 | ADMISI - The Ghost In The Machine | March/April 2019


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