SUGAR IS FOOD AND ENERGY
We ended 21 in a positive note for Sugar with decent prices for producers and an expectation of greater trade-flow for 22.
The World Sugar Trade flow shrunk in 21 by an estimated 5,5 mln m/t to around 57 mln m/t. The drop in the flow of Raw sugars was around 3,6 mln m/t and for Refined/White sugars 2 mln m/t. Although the flow shrunk, India managed to export 2 mln m/t more than the year before. India proximity to Refineries (Raw sugar importers) and Refined/White importers helped a great deal given higher freight rates and container availability.
The Sugar S&D for April21/March22 was estimated to be 2 mln m/t. We estimated sugar production at 181,4 mln m/t vs. demand at 183,4 mln m/t basis R.V. (Raw Value = bringing everything to raw sugar basis). When we looked forward to 22/23 sugar year, we expected a small surplus, all going well and assuming that Sugar prices remained better than Ethanol in Brazil.
So, has anything changed? Well, there is a say that large crops get larger and India is certainly proving the point. The estimated acreage was around 5,5 mln hectares and may still be the case, but the Agri yields, given some better varieties, is leading to a larger crop, perhaps around 33,5 mln m/t. Total sugar production as of the 15th of March was already 2,4 mln m/t larger than last year, when the total production was 30,6 mln m/t.
THE CURRENT ETHANOL DOMESTIC MARKET IN THE CENTRE-SOUTH IS EQUIVALENT TO AROUND USCTS/LB 18.80 BASIS 96 POL FOR HYDROUS ETHANOL, SIMILAR TO WHERE SUGAR IS TRADING.
The larger Indian Sugar production with higher Sugar prices is leading to higher exports, perhaps over 8 mln m/t for Oct 21 to Sept 22, which may bring some concerns to the Indian government, as the next crop is not certain yet (acreage, weather/yields). The carry over for end of Oct 22 may be down to 7,3 mln m/t, around 3 months of domestic demand.
When we look at Brazil, the crop which just finished proved to be disappointing (low rainfall and frost) around 32 mln m/t. Brazil like many other Sugar exporting Nations had reduced exports and therefore the carry over into the coming crop year will be OK, just OK! So, what will the next crop be? Well, the rainfall and high prices will lead to a larger cane crop, estimated at 565/570 mln m/t (up from 521 mln m/t) which would lead to a larger sugar production.
As we stand, the current Ethanol domestic market in the Centre-South is equivalent to around UScts/ lb 18.80 basis 96 pol for Hydrous ethanol, similar to where Sugar is trading. The question is what will happen to Crude prices going forward.
We have seen Crude prices shooting up from $90’s to as much as $139 per barrel, on the Ukrainian invasion. We are now trading at $106 (after dropping to $ 96/97 on the 16/17th of March). There is a line of thought that believes Crude will stay strong and trading into $ 120/130 and therefore Gasoline prices in Brazil will rise further and Brazil will produce more ethanol than last year.
22 | ADMISI - The Ghost In The Machine | Q1 Edition 2022
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