HALF FULL OR HALF EMPTY?
SUGAR – IS IT
We started 2023 in a better economic mood than we finished 2022, as many focus on what is to come, rather than the past.
The talk of recession is still on, but many are now expecting a soft landing or a delayed effect if recession at all! World Economic growth was downgraded to 2.6% in 2023 from 3.15% in 2022 and most countries are expected to experience a slower growth, except China!
What is to come? There is a general sense that Chinese domestic demand will improve and therefore imports will rise again, especially for crude and agri commodities. Economic growth is expected to rise to 5.2% in 2023 from 3% in 2022. Well, that’s good, right?
The drop in freight rates, for some regions, close to the levels prior to COVID-19, may lead to greater imports aiming to replenish stocks. The same may apply to other importers including those for sugar.
Well, time will tell, despite freight being lower, Commodities are still holding their value and sugar is one of them.
Demand for crude is expected to improve in 2023 to around 101.9 mln BPD from 99.6 mln BPD (97.1 mln BPD in 2021) and China is expected to import more, perhaps 500k BPD more in 2023.
Current estimates for crude prices in 2023 and 2024 have been around US$ 90 per barrel, but there were some expecting US$ 110/120. We now hear some of the higher expectations have dropped to US$ 95!
So, if the world economy doesn’t disappoint too much (any growth is better than no growth), crude demand will rise and as freight rates are down, wouldn’t sugar prices be somewhat supported?
Well, one may say so, but what does the sugar S&D look like? We just had the end of the Brazilian CS harvest which ended at 542 mln m/t of cane (+19.8 mln m/t), 33.5 mln m/t of sugar (+1.4 mln m/t) and the sugar mix at 42.38% (+0.15%).
The coming crop is expected to rise to min 560 mln m/t to as much as 580 mln m/t of cane. The sugar mix is expected to rise to 44% and therefore we could see min 37.5 mln m/t, about 4 mln m/t. That’s good right?
The issues we have for the coming year may be around Thailand’s growth (11 or 11.7mln m/t) and the uncertainties around the current Indian crop (34 or 36mln m/t) and the coming one. India runs the usual Monsoon risk around June to August, as low rainfall means lower cane agri yields, especially for Maharashtra.
So, besides the usual other issues, the future S&D is not certain at this time of the year.
OK, but how was the last one? Based on the data collected and estimates till March, we see April 22 / March 23 surplus at around 6 mln m/t R.V. similar to what we saw back in October 22.
24 | ADMISI - The Ghost In The Machine | Q1 Edition 2023
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