SUGAR STILL NOT CRYSTAL CLEAR


As the second half of 2022 starts, many will remember the first half as a momentous period in global history but, sadly, for all the wrong reasons.


Back at the beginning of March the Russian invasion of Ukraine had just started. An early conclusion to the war has not occurred with the conflict rumbling on. It is safe to say it has not entirely gone to plan from Putin’s perspective. Nevertheless, the initial violent reaction seen in crude and many other commodities have been replaced by other issues, not least, raging inflation across most of the world’s developed economies and the threat of a global recession. The markets, with few exceptions, have dropped considerably. Crude is over 25% lower than the 14 year highs reached in March. Wheat is over 40% off the March highs. A more considered decline has been seen in sugar. Prices reacted late to the turmoil back in March when they jumped to just over 20.50 cents. Nevertheless, the market has remained volatile seeing a 290 point range since the beginning of March as conflicting news and views buffet prices.


One of the consequences of prices surging above 20 cents was that it gave Indian shippers the ability to sell more sugar exports at healthy profits for which they will have been truly grateful. By March, pre-harvest estimates of 31 million tonnes of sugar production had been increased with some daringly suggesting the possibility of 34 million tonnes. In the event, production hit 36 million tonnes which propelled India back to largest producer in the world. Analysts are still scratching their heads on how they got it so wrong. The Thai season ended with a solid 10 million tonnes of sugar production which was around 25% larger than the previous season when the cane fields were hit by drought. Elsewhere, there appeared to be no serious production issues. Lower EU production offset by higher production in Pakistan.


With about two months before the end of the 2021/22 season the general consensus is that global production has equalled global demand give or take a million tonnes either way, not to mention the 5 million tonnes of Indian exports from previous season’s stocks. The Indian government’s decision to cap exports at 10 million tonnes had prices spiking but it soon became apparent that, firstly, the cap might really be 11 million tonnes and secondly, perhaps, no more would be needed.


4 | ADMISI - The Ghost In The Machine | Q2 Edition 2022


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