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THE END OF THE AUSTRALIAN HARVEST IS APPROACHING AND WILL LIKELY RESULT IN A 10% DROP ON PRODUCTION GIVEN THE LOWER RAINFALL, PERHAPS CLOSE TO 4,1 MLN M/T.


THE BITTER SIDE OF SUGAR, BUT CONSUMERS ARE NOT


COMPLAINING!


The price for Sugar in the World Market (export/import market) has been trading on average at UScts/lb 12,25 in the past 10 months, which is just slightly better than the average of UScts/lb 12,18 in 2018 and much lower than UScts/lb 15,56 in 2017 and UScts/lb 18,42 seen in 2016.


World production vs. demand is expected to yield a deficit of 5 mln m/t R.V. (which is up from 4 mln m/t deficit estimated in Aug) as many large producers are or will be producing less than earlier estimates.


With Thailand, Australia and the EU experiencing less than ideal weather, production will be down in comparison to last year. Current Sugar prices have also caused poorer cane and beet husbandry as well as a reduction in acreage for some producers including India, Pakistan, Thailand, and the EU.


So, with a deficit year, one would expect Sugar prices to recover - and perhaps they will. However we still need to deal with Sugar stocks being released into the World Market, these are mainly coming from India with some volumes also from Thailand and Mexico.


The Indian Government have decided to help Cane Farmers (+/- US$ 147 per m/t) for the second year, by helping Sugar Millers export 6 mln m/t of their stocks at the current depressed World Market prices. The intended exports will reduce the pressure on the domestic market and allow Sugar Millers to pay the agreed cane prices (+/- US$ 41 per m/t). This will also improve the value of Sugar Refineries especially the ones listed at their Stock Market value.


The Indian domestic market has been trading around INR 3167 per 100kg (around US$ 464 per m/t) this year and is worth around INR 3303 per 100kg (U$ 479 per m/t) allowing Millers to clear 11/13% margins, which is not great. So, based on the current Indian Government incentives and the domestic market, the breakeven would be around US$ 330/335 per m/t fob which is not far from where the World Market (white sugar) is currently.


The harvest is about 4 weeks away and the crop is expected to be lower however estimates are still quite wide ranging from 27,5 to 29 mln m/t, which is still higher than domestic needs at 26 mln m/t. So, Indian export policy is not facilitating the World Market to reflect the 18/19 deficit as Indian exports are making up the difference at ‘attractive prices’. It seems the Sugar World Market prices are not going after the Indian stocks but it appears that Indian stocks are going after the World Market demand.


Sugar production in Brazil will once again be on the lower side, given that Ethanol prices return better than Sugar. The cane crop may be marginally better than last year and the Sugar mix marginally lower, therefore we are heading for a crop similar to last year around 26 mln m/t.


26 | ADMISI - The Ghost In The Machine | November/December 2019


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