WE ALSO SEE MEXICO AND THE USA IMPROVING FROM THEIR POOR CROPS LAST YEAR AND WILL CONTRIBUTE WITH A COMBINED 1,8 MLN M/T HIGHER SUGAR PRODUCTION.
The rise in sugar production and therefore a drop in Ethanol production, would not be a major issue for the Brazilian Ethanol S&D, given the carry over and the lower demand.
India is also expected to improve next crop, depending on the coming monsoon which is expected to be OK. India may end up producing 27,2 mln m/t this year and may rise to 31/32 mln m/t next year. Indian Sugar exports for Oct19/early May20 reached 4,4 mln m/t and 3,7 mln m/t were locally produced sugars (not tolled sugars) out of the 6 mln m/t export program. Indian Millers are seeking a higher Minimum Domestic market price so will the Gov “help” once again to get “extra production” into the World Market? It seems likely.
We also see Mexico and the USA improving from their poor crops last year and will contribute with a combined 1,8 mln m/t higher sugar production.
As we move into April20/March21 Sugar S&D we see a potential surplus of 8,6 mln m/t R.V.
Elsewhere in the world we are not expecting a better EU crop, at least not yet. Total EU area is expected to be marginally down and the weather in the EU has been drier than normal.
We also expected the CIS to produce less, with lower acreage and lower Agri/sugar yields. The last crop was fantastic for Russia and unlikely to be repeated.
Thailand is also not expected to recover much from a very poor crop last year (75 mln m/t down from 131 mln m/t of cane). So far, the rainfall has been poor and it is likely they lost some acreage but the jury is still out.
Central America and Colombia are also not expected to divert too much from the last crop production.
Sugar prices tend to depend on production (weather and economics) and demand (GDP, population and behaviours) and what we seem to have in the short term is an incentive to maximize sugar in Brazil and a “partial” demand destruction.
As lockdowns are lifted and people start moving and producing, they will consume more and fuel and sugar will be some of the commodities which will see better days.
We need to watch the Real (export parity) Crude (gasoline prices) and demand (end of lockdowns and better economic activity) to see how Ethanol prices and demand will improve in Brazil and how fast millers may adjust their Sugar Mix.
The April/March 19/20 deficit allowed for Sugar stocks to be drawn down (+/- 9 mln m/t), as it affected largely the world market with reduced exports from exporters and higher imports from importers.
We see April20/March21 Sugar S&D in a surplus perhaps as high as 8,6 mln m/t but with downside, to as low 4 mln m/t, depending on economic activity, as well Ethanol demand in Brazil and the weather among sugar producing nations.
Alberto Peixoto E:
albertopeixoto@apcommodities.london T: +44(0) 7570 714 981
37 | ADMISI - The Ghost In The Machine | Q2 Edition
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